mais um up nas taxas para 3,75%
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Fed raises rates again
Central bank boosts key short-term rate another quarter point despite expected impact of Katrina.
September 20, 2005: 3:08 PM EDT
By Paul R. La Monica, CNN/Money senior writer
NEW YORK (CNN/Money) - The Federal Reserve raised a key short-term interest rate Tuesday, dashing the hopes of some who had hoped the Fed would pause to assess the impact of Hurricane Katrina on the economy.
The central bank's policy-makers boosted their target for the federal funds rate a quarter-percentage point to 3.75 percent, the highest level in more than four years. The fed funds rate, an overnight bank lending rate, affects the rates for credit cards, car loans and adjustable-rate mortgages.
This marks the 11th consecutive time that the Fed has raised rates since June 2004 as Alan Greenspan and other central bankers seek to keep inflation under control. In its heavily scrutinized statement, the Fed said that more "measured" rate increases were likely in the coming months. The Fed meets again on November 1.
The decision to raise rates was not unanimous however. Fed governor Mark Olson voted against rating rates. The last time that all Fed members didn't agree about a rate decision was in June 2003.
In the immediate aftermath of the hurricane, there was a growing call for the Fed to not raise rates at this meeting since some feared a rate hike could crimp growth in the short-term and possibly even send the economy into a recession.
The Fed acknowledged these concerns in its statement. "The widespread devastation in the Gulf region, the associated dislocation of economic activity, and the boost to energy prices imply that spending, production, and employment will be set back in the near term," the Fed said.
But it added that Katrina would not derail economic growth over the long-term. "While these unfortunate developments have increased uncertainty about near-term economic performance, it is the Committee's view that they do not pose a more persistent threat," it said.
In fact, some have argued that higher prices of oil, food and other consumer goods could be one byproduct of Katrina, not a slowdown. And the Fed appeared to indicate that it may be even more concerned about inflation than it was before Katrina.
To that end, the Fed pointed out that "longer-term inflation expectations remain contained" while in previous statements this year, the Fed had said that inflation expectations were "well contained."
Mark Zandi, chief economist with Economy.com, a research Web site, said the absence of the word "well" was significant. As such, he expects more rate hikes in the coming months.
"The Fed is growing more uncomfortable about inflation," said Zandi. "This is a more hawkish statement and signals that more tightening is on the way."
John Kosar, director of research with Asbury Research, an institutional investment research firm based in Chicago, added that the Fed's decision confirms what investors had reluctantly come to expect in the past week or so, namely that despite Katrina, the economy is not in danger of a severe slowdown and that more rate hikes were necessary.
"As time went on, I think that the marketplace became more familiar with what the damages from Katrina were," Kosar said. "The Fed put an exclamation point on that by raising rates again. They said there would be some short-term issues but that they don't expect Katrina to change much in the economy."
Wall Street didn't react so favorably though. Stocks, which were trading slightly higher before the announcement, lost all their gains following the announcement and remained in negative territory in late afternoon trading. Further confusing matters, bonds rallied following the Fed news, sending the yield on the benchmark 10-year Treasury down to 4.25 percent. Lower long-term bond rates are typically associated with an economic slowdown. Bond yields and prices move in opposite directions
Central bank boosts key short-term rate another quarter point despite expected impact of Katrina.
September 20, 2005: 3:08 PM EDT
By Paul R. La Monica, CNN/Money senior writer
NEW YORK (CNN/Money) - The Federal Reserve raised a key short-term interest rate Tuesday, dashing the hopes of some who had hoped the Fed would pause to assess the impact of Hurricane Katrina on the economy.
The central bank's policy-makers boosted their target for the federal funds rate a quarter-percentage point to 3.75 percent, the highest level in more than four years. The fed funds rate, an overnight bank lending rate, affects the rates for credit cards, car loans and adjustable-rate mortgages.
This marks the 11th consecutive time that the Fed has raised rates since June 2004 as Alan Greenspan and other central bankers seek to keep inflation under control. In its heavily scrutinized statement, the Fed said that more "measured" rate increases were likely in the coming months. The Fed meets again on November 1.
The decision to raise rates was not unanimous however. Fed governor Mark Olson voted against rating rates. The last time that all Fed members didn't agree about a rate decision was in June 2003.
In the immediate aftermath of the hurricane, there was a growing call for the Fed to not raise rates at this meeting since some feared a rate hike could crimp growth in the short-term and possibly even send the economy into a recession.
The Fed acknowledged these concerns in its statement. "The widespread devastation in the Gulf region, the associated dislocation of economic activity, and the boost to energy prices imply that spending, production, and employment will be set back in the near term," the Fed said.
But it added that Katrina would not derail economic growth over the long-term. "While these unfortunate developments have increased uncertainty about near-term economic performance, it is the Committee's view that they do not pose a more persistent threat," it said.
In fact, some have argued that higher prices of oil, food and other consumer goods could be one byproduct of Katrina, not a slowdown. And the Fed appeared to indicate that it may be even more concerned about inflation than it was before Katrina.
To that end, the Fed pointed out that "longer-term inflation expectations remain contained" while in previous statements this year, the Fed had said that inflation expectations were "well contained."
Mark Zandi, chief economist with Economy.com, a research Web site, said the absence of the word "well" was significant. As such, he expects more rate hikes in the coming months.
"The Fed is growing more uncomfortable about inflation," said Zandi. "This is a more hawkish statement and signals that more tightening is on the way."
John Kosar, director of research with Asbury Research, an institutional investment research firm based in Chicago, added that the Fed's decision confirms what investors had reluctantly come to expect in the past week or so, namely that despite Katrina, the economy is not in danger of a severe slowdown and that more rate hikes were necessary.
"As time went on, I think that the marketplace became more familiar with what the damages from Katrina were," Kosar said. "The Fed put an exclamation point on that by raising rates again. They said there would be some short-term issues but that they don't expect Katrina to change much in the economy."
Wall Street didn't react so favorably though. Stocks, which were trading slightly higher before the announcement, lost all their gains following the announcement and remained in negative territory in late afternoon trading. Further confusing matters, bonds rallied following the Fed news, sending the yield on the benchmark 10-year Treasury down to 4.25 percent. Lower long-term bond rates are typically associated with an economic slowdown. Bond yields and prices move in opposite directions
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