Fed Raises Short-Term Rates

WASHINGTON - (03/23/05) -- As was widely expected, the FederalReserve on Tuesday lifted the target rate for overnight Fed Funds,the benchmark for short-term rates, for the seventh time over thelast nine months, to 2.75%. The Fed said it expected to keepraising short-term borrowing costs at a 'measured' pace, wordingbelieved to imply modest quarter-point increases when the CentralBank's Federal Open Market Committee meets again in May and June.The Fed began lifting the overnight rate, to which short-term rateson adjustable-rate mortgages, home equity loans and credit cardloans are tied, last June, when the rate sat at a five-decade lowof just 1%. "This going to put more pressure on credit unions'bottom lines by pushing up short-term rates without a similarincrease in long-term rates. It makes it more difficult fordepository institutions to generate net income," Bill Hampel, chiefeconomist for CUNA, told The Credit Union Journal.