Industry News

Fed raises federal funds rate to 3.75%

Committee does not see Katrina causing 'persistent threat'

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The Federal Reserve again has boosted the key federal funds interest rate to 3.75 percent, the 11th increase in a year. The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points, the committee said in a statement. The Fed committee said Hurricane Katrina's devastation to the Gulf region implies that spending, production and employment will be set back in the near term. "In addition to elevating premiums for some energy products, the disruption to the production and refining infrastructure may add to energy price volatility," the Fed said in prepared remarks. While Katrina's damage has increased uncertainty about the near-term economy, the committee said the events "do not pose a more persistent threat." "(M)onetary policy accommodation, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Higher energy and other costs have the potential to add to inflation pressures. Howev...