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The Federal Open Market Committee (FOMC) raised its target for short-term interest rates today (Aug. 9) by a quarter percentage point to 3.5% and gave no hint that it is interested in stopping anytime soon.
According to CBS MarketWatch, the Federal Reserve’s policymaking committee left its post-meeting statement largely unchanged from June’s statement. The committee said rates remain “accommodative” and said once again that it believes rates can be raised at a “measured pace.”
The vote to raise rates was unanimous. It was the 10th straight meeting at which the FOMC raised rates by a quarter point after the Fed funds reached a four-decade low of 1% in mid-2003.
Other lending rates were expected to follow suit with a quarter-point increase, including raising the benchmark prime rate – a key lending index for recreational vehicle retailers and consumers – to 6.50%.
In a largely symbolic move, the Federal Reserve Board separately approved an increase in the discount rate to the 4.5% requested by all 12 regional Fed banks.
In its statement, the FOMC said the risks of higher inflation and weaker growth will remain balanced if appropriate policies are followed.
In addition, the Fed said the economy is getting stronger as the summer progresses and that consumer spending has strengthened, despite higher energy prices and the labor market continues to improve gradually.
In regards to inflation, the Fed maintained that core inflation has been relatively low, but that inflationary pressures “have stayed elevated.”