WASHINGTON - The Federal Open Market Committee raised its targetfor the federal funds rate 25 basis points to 5.25%, and indicatedpotentially more tightening on the way. "Recent indicators suggestthat economic growth is moderating from its quite strong paceearlier this year, partly reflecting a gradual cooling of thehousing market and the lagged effects of increases in interestrates and energy prices," the FOMC's statement read. However, theportion of the committee's statement that was particularly tellingwas: "Readings on core inflation have been elevated in recentmonths. Ongoing productivity gains have held down the rise in unitlabor costs, and inflation expectations remain contained. However,the high levels of resource utilization and of the prices of energyand other commodities have the potential to sustain inflationpressures." "They're leaving the door open for more hikes asnecessary," NAFCU Senior Economist Jeff Taylor explained. Lookinginto the future, Taylor said he believes the FOMC will likely leaverates alone in August, but bump them up another 25 basis points inSeptember. But for the first time in a long time there is "a wideswath of views" among economists as to where rates will be byyear-end. Taylor said he has heard predictions up to 6% but hebelieves the Fed will probably leave things alone after Septemberwhen he expects them to hit 5.5%. The economy grew at 5.6% in thefirst quarter, but it is expected to be around 3% over the nextthree quarters, "which is good. The economy can not sustain [highgrowth] without inflation," he said. Taylor noted that long rateshave gone up some in the last month, but, "If they increase ratesagain it will be totally flat if not completely invert." Tocompensate, "[Credit unions] need to diversify as much as you cannot only to keep your members happy but to not have all your eggsin one basket." Taylor suggested. "If you take away non-interestincome they'd really be hurting. Not all of them but a lot ofthem." While mortgages and car loans are slowing credit unions needto look to other things; some are getting into business lending orworking with credit union service [email protected]