Interest rates head up as Fed stays put

Financial market fears drive increases

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The Federal Reserve kept its target for the federal funds overnight rate at 2 percent today, even as the rate banks actually charge each other for overnight or short-term loans soars over fears related to continued turmoil in financial markets.

If the Fed and European central banks are unable to ease those fears by loosening the reins on the money supply, interest rates on many adjustable-rate mortgage (ARM) loans tied to the federal funds and London Interbank Offered Rate (LIBOR) could soar, leading to more delinquencies and foreclosures.