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Economy in Brief

Fed Funds Rate Increased to 5.00%
by Tom Moeller May 10, 2006

The Federal Open Market Committee raised the target interest rate for Federal funds 25 basis points to 5.00% at today's meeting. This sixteenth 25 basis point increase since June of 2004 was the result of a unanimous decision and was widely expected by analysts.

The discount rate also was raised 25 basis points to 6.00%.

The Fed's rationale for raising the rate was succinct. "Economic growth has been quite strong so far this year."

Future rate increases were perhaps suggested by the statement "... further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information."

For the complete text of the Fed's latest press release please follow this link.

Is Price Stability Enough? by William R. White at the Bank for International Settlements can be found here.

Transparency, Expectations and Forecasts from the Federal Reserve Bank of Atlanta is available here.

Enhancing Fed Credibility from the Federal Reserve Bank of San Francisco is found here.

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