Fed lifts rates 10th time (now at 3.5%)

[papau]

http://www.washingtonpost.com/wp-dyn/content/article/2005/08/09/AR2005080900455.html

Fed lifts rates 10th time

By Tim Ahmann
Reuters
Tuesday, August 9, 2005; 2:31 PM

WASHINGTON (Reuters) - The Federal Reserve raised a key U.S. interest rate a quarter-percentage point on Tuesday, offering no sign after a 10th straight rise that it was ready to end its campaign of modest increases to curb inflation.

The U.S. central bank's policy-setting Federal Open Market Committee unanimously voted to lift the benchmark federal funds rate, which can sway borrowing costs throughout the economy, to a four-year high of 3.5 percent.

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Long-term interest rates, which have long remained defiantly low in the face of the Fed's increases and which have helped stimulate the housing market, are at last rising on signs of economic strength.

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Some analysts, however, now think the central bank may need to push rates up high enough to try to slow growth and prevent an inflationary overheating.

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[The_Casual_Observer]

1. Raising this rate only increases inflation, however they have no

choice in the matter. It is out of their hands.

[On the Road]

2. It Increases Inflation at Least Until a Recession

That's generally the plan.

[enigma000]

3. Does this not lower inflation?

http://en.wikipedia.org/wiki/Inflation

"There are a number of methods which have been suggested to stop inflation. Central Banks such as the U.S. Federal Reserve can affect inflation to a significant extent through setting interest rates and through other operations (i.e., using monetary policy). High interest rates (and slow growth of the money supply) are the traditional way that Central Banks fight inflation, using unemployment and the decline of production to prevent price increases."

[On the Road]

4. Yes, the Decreases in Inflation are Caused Indirectly by

"unemployment and the decline of production".