FOMC Raises Fed Funds Target To 4.25%

For the 13th consecutive time since June 2004, the Federal Open Mark Committee (FOMC) has raised the federal funds target rate. On Dec. 13, the next-to-last meeting for FOMC Chairman Alan Greenspan, the panel raised the target by 25 basis points to 4.25%, the level economists generally anticipated. The influential federal funds rate is the interest banks charge each other on overnight loans.

"Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained," the committee said in a statement. "Nevertheless, possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures." As a result, "some further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance," the panel said. However, the use of the word "some" in its Dec. 13 statement, a contrast to previous FOMC statements, may indicate that barring unforeseen circumstances the panel may be coming to the end of this series of hikes in the federal funds target rate.

January 31, 2006, is slated to be Greenspan's final FOMC meeting. His nominated successor is Ben S. Bernanke.

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