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Economy in Brief

Fed Funds Rate Raised to 4.25%
by Tom Moeller December 13, 2005

The target interest rate for Federal funds was raised 25 basis points to 4.25% at the latest meeting of the Federal Open Market Committee. The unanimous decision was widely expected by analysts. The discount rate also was raised 25 basis points to 5.25%. This latest increase was the thirteenth since June of 2004.

Today's press release from the Fed expressed clear concern about pending inflationary pressure. "... possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures."

As a result of this concern, "further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance."

For the complete text of the Fed's latest press release please click here.

Monetary Policy and the Term Structure of Interest Rates from the Federal Reserve Bank of Richmond can be found here.

Model Uncertainty and Policy Evaluation: Some Theory and Empirics from the Federal Reserve Bank of San Francisco can be found here.

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