Fed Lifts U.S. Rates By Quarter Point

The Federal Reserve raised key U.S .interest rates by a quarter point March 22 to take the headline federal funds rate to 2.75%, but said its policy stance remains "accommodative." The central bank's policy-making Federal Open Market Committee raised the federal funds rate by 25 basis points for the seventh time in as many meetings, and the discount rate by the same amount to 3.75%.

"The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity," the FOMC said. "Output evidently continues to grow at a solid pace despite the rise in energy prices, and labor market conditions continue to improve gradually."

But inflation was a potential cause of concern, the FOMC said. "Though longer-term inflation expectations remain well contained, pressures on inflation have picked up in recent months and pricing power is more evident," the statement said. "The rise in energy prices, however, has not notably fed through to core consumer prices." The FOMC said that with "appropriate" monetary policy action, risks to sustainable growth and price stability should be kept in balance. "Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability," it said.

Copyright Agence France-Presse, 2005

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