Fed Hikes Target Rate to 4.5%

The Federal Open Market Committee, the monetary policy arm of the Federal Reserve Board, has raised its target for the federal funds rate to 4.5%, saying that "possible increases in resource utilization" and "elevated energy prices" could add to inflation pressures.In addition to the 25-basis-point hike in the target rate, the Fed has approved a similar increase in the discount rate, to 5.5%. (The federal funds rate is the rate at which banks make overnight loans to each other. The discount rate is the rate charged by regional Federal Reserve Banks to commercial banks and other depository institutions.) Swiss Re U.S. senior economist Arun Raha said the federal funds rate hike "comes as no surprise" and predicted further hikes because "inflation concerns have yet to subside, and incoming Chair Ben Bernanke needs to establish his inflation-fighting credentials." The Fed can be found online at http://www.federalreserve.gov.