Fed Expected To Boost Short-Term Rates,Again

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WASHINGTON - (03/22/05) -- The Federal Reserve is expected tocontinue it strategy aimed at tamping inflation by raising thetarget for short-term interest rates, the overnight Fed Funds rate,again Tuesday. Jeff Taylor, a economist for NAFCU, predicted theFed will add another 25 basis points to the benchmark rate--itsseventh 25 bps hike in the past year--pushing the target rate to2.75%. The Fed-watcher said he believes the Fed will continue toadd 25 bps to the short-term rate at the May and June meeting ofits Open Market Committee, pushing the rate to 3.25%. "Then they'regoing to kind of take a look at things and see where we are, interms of inflation and economic growth," Taylor told The CreditUnion Journal. The Fed's action has boosted average rates onshort-term credit union loans, like adjustable-rate mortgages, homeequity loans and credit card loans ,by between 40 bps and 100 bps(1%) over the last year, according to DataTrac Corp., which followsrates charged by 8,000 financial institutions, including 1,000credit unions. The short-term rate hikes, however, have donenothing to affact rates on regular shares and share drafts, whichhave remained mired at all-time lows of just 76 bps and 45 bps.,respectively, for the past year.

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