Fed Likely To Raise Funds Rate A Quarter Percent

Unless Chairman Ben Bernanke and the other voting members of the Federal Open Market Committee (FOMC) believe that U.S. core inflation is on an economic tear, the panel is likely to vote tomorrow to raise the influential federal funds target rate only a quarter of a percentage point. That would bring the target rate to 5.25% from its current 5%.

The federal funds target rate is the interest that banks charge each other on overnight loans.

Although the FOMC, the Federal Reserve's monetary policy-making panel, has not used the word since Bernanke succeeded Alan Greenspan earlier this year, it has continued the policy of "measured" increases in the target rate. During the past two years the FOMC has raised the federal funds target rate from 5% from 1%.

After its two-day June meeting that ends tomorrow, the FOMC's next scheduled meeting is in August. And unless inflation soars or economic growth dramatically slows, the FOMC is likely to nudge the funds target rate up another quarter point in August, bringing it to 5.5%.

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