WASHINGTON - Most economists predicted that the Federal Reserve would raise rates, it was more a question of how much-a quarter-point or half-point? At its Feb. 2. meeting the Fed raised interest rates by a quarter-point. It marked the fourth rate increase since June. The economic reasoning behind the increase is to try and slow the sizzling hot economy and fend off inflation. In a statement the Fed said it was worried that the red-hot economy "could foster inflationary imbalances that would undermine the economy's record economic expansion.'' As a result of the increase the federal funds rate-the interest that banks charge each other on overnight loans-increased from 5.50% to to 5.75%. The Fed also raised the discount rate- the interest that the Fed charges to make loans to banks- by a quarter point to 5.25% from 5%. In another Fed related event, the Senate Banking Committee on Banking, Housing and Urban Affairs approved the nomination of Alan Greenspan to a fourth term as chairman of the Federal Reserve.
Fed raises rates, Senate approves Greenspan nomination
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