Fed seen raising rates yet again
By Purchasing Staff -- Purchasing, 11/28/2005 2:00:00 AM
The Federal Reserve is expected to increase its key short-term rate again at its next meeting, Dec. 13, due to continued inflation fears from higher energy costs.
To fend off inflation creeping down to the consumer level, the Fed at the November meeting raised by a quarter-percentage point to 4%, the highest level in more than four years. It marked the 12th increase of that size since the Fed began to tighten credit in June 2004. However, minutes of the Fed policymaker's closed-door meeting in November underscore their concern about the prospects of resurgent inflation from higher-than-usual energy costs. "A number of firms had been reporting a greater ability to pass through increases in energy and other costs to customers," the minutes say, "though evidently more so to other businesses than to consumers." According to the minutes, policymakers were confident that the economy was weathering well the August/September storms. "The economy seemed to be growing at a fairly strong pace, despite the temporary disruptions associated with the hurricanes," the Fed document says. Still, the minutes also show that all nine members of the board of directors believed that it was important to keep raising rates "to check upside risks to inflation."
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