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Fed Raises Rates Another Quarter Percent

WASHINGTON - The Fed increased rates 25 basis points last week to 1.5%. In its statement, the Fed stuck to its "measured" approach, though it's always eyeing the latest data. "With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a...

By Staff Writer | Updated on August 17, 2004

WASHINGTON – The Fed increased rates 25 basis points last week to 1.5%. In its statement, the Fed stuck to its “measured” approach, though it’s always eyeing the latest data. “With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured,” it said. Dwight Johnston, Vice President of Economic and Market Research for WesCorp said the Fed will have plenty of new data to look at prior to its next meeting on Sept. 21 that could influence its decisions. There are two key inflationary reports and one jobs report coming out soon. Johnston said this year has been a bit befuddling for economists in that there’s been three so-called trends. He said early in the year jobs were weak and rates fell, then jobs took off and rates went up, and now there’s two months of weak growth. “So we’ve established nothing in the way of a trend.” NAFCU economist Jeff Taylor said he expects rates to come in at 2% by the end of the year, meaning the Fed can skip one of its three remaining meetings (likely the November one he believes due to the election) and still hit 2%. Taylor said despite recent weaknesses in job reports and the economy, the Fed seems poised to want to keep on the rate increase track, and in its statement cited rising energy prices and other transitory factors for the recent weakness. “My message to credit unions is unless there’s real weakness in July and August numbers, they’ll raise by another 25 in September,” said Taylor.

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