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Fed Funds Rate Boosted for 11th Time

Fed Funds Rate Boosted for 11th TimeFOMC raises fed funds target to 3.75%

September 20, 2005

By COCO SALAZAR

Katrina’s blow wasn’t enough for the Federal Open Market Committee to take a pause from raising the federal funds target.

The Fed announced today it decided to raise its target by another 25 basis points to 3.75%, continuing the ascent that began in June 2004 and the 11th consecutive increase.

Katrina’s aftermath of “widespread devastation in the Gulf region, the associated dislocation of economic activity, and the boost to energy prices imply that spending, production, and employment will be set back in the near term,” the Fed said in the announcement.

“While these unfortunate developments have increased uncertainty about near-term economic performance, it is the Committee’s view that they do not pose a more persistent threat,” the Fed added. “Rather, monetary policy accommodation, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Higher energy and other costs have the potential to add to inflation pressures. However, core inflation has been relatively low in recent months and longer-term inflation expectations remain contained.”

The 1-year Treasury bill was 3.86% on Friday and ended the week averaging 3.82%, six BPS above the prior week’s average.

Late Tuesday, the 10-year Treasury note yielded 4.25%, slipping 0.06% for the day.


Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.E-mail: s3celeste@aol.com

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