Federal Funds rate raised

The Washington Post reports that Fed officials unanimously agreed to lift their benchmark federal funds rate to 4 percent from 3.75 percent, for a 12th consecutive hike since June 2004 when the rate was at a four-decade low of 1 percent.

Fed chairman Alan Greenspan and his colleagues on the committee indicated they view the rate as still low enough to stimulate economic activity, and said they would probably keep lifting it at a ”measured” pace, which has come to mean a quarter-percentage point increase at each scheduled committee meeting.

This tells us that the Fed still considers inflation a problem and that the effects of the recent hurricanes are seen as temporary issues as opposed to long term economic setbacks.

Investors took little notice since the biiger news was coming from car manufacturers, and the effect overall should be mild. According to MSN Money Central, banks will raise their prime lending rates, and that will affect credit-card borrowers whose rates float with the prime. Mortgage rates, which have been rising lately, could move higher. Bankrate.com says the national rate on a 30-year fixed-rate mortgage has climbed from 5.25% in early September to 5.76% today.

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