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Disappointed investors sold stocks lower Tuesday (March 28) after the Federal Reserve indicated it would continue its credit-tightening policy, according to an Associated Press report.
Shortly after the Fed’s announcement of a quarter-point increase in the federal funds rate, the Dow Jones industria average was off 55.87, or 0.5%, and continued falling in late-day trading
It had been a foregone conclusion that the Fed would raise rates Tuesday, but investors had been hoping for hints that the Fed might be nearing the end of its rate increase cycle, which began nearly two years ago.
The latest increase, the 15th consecutive rise of a quarter-point, leaves the fed funds rate at 4.75%, its highest level since April 2001.
The Fed said in a statement accompanying its decision that “some further policy firming may be needed.” That indicated the Fed was inclined to keep raising rates to try to prevent the economy from growing too fast.
The Fed’s two-day meeting, which began Monday, is the first led by new chairman Ben Bernanke.
The Fed has been raising rates steadily since June 2004 under a program begun by Bernanke’s predecessor, Alan Greenspan. Since that time, the benchmark federal funds rate, the interest that banks charge each other for overnight loans, has risen from a low of 1%.