Fed Raises Short-Term Rates

Register now

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.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER