- The Washington Times - Thursday, June 29, 2006

3:14 p.m.

The Federal Reserve today raised a key interest rate for the 17th consecutive time and signaled that further rate increases may still be needed to fight inflation.

The central bank boosted the federal funds rate, the interest that banks charge each other, by a quarter-point to 5.25 percent, the highest level in more than five years. When the Fed started its credit-tightening campaign two years ago, the funds rate stood at a 46-year low of 1 percent.

In the statement explaining the decision, Fed Chairman Ben S. Bernanke and his colleagues said that “some further policy firming may yet be needed to address inflation risks.”

The committee said that “some inflation risks remain” even though it was likely that a moderation in economic growth “should help to limit inflation pressures over time.”

The Fed’s rate increases have raised the borrowing costs for millions of Americans on everything from home equity to auto loans.

Commercial banks were expected to quickly follow the Fed announcement by raising their benchmark prime rate by a quarter-point to a five-year high of 8.25 percent.

The latest rate increase had been widely expected, given comments Mr. Bernanke made on June 5 in which he called a rise in the rate of inflation an “unwelcome” development, a comment that contributed to a one-day 199-point drop in the Dow Jones Industrial Average.

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