Fed To Hike Short-Term RatesAgain...

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WASHINGTON - (05/03/05) -- The Federal Reserve is widelyexpected to boost short-term rates again when it meets Tuesday,maintaining a course aimed at damping inflation and temperingeconomic growth. Jeff Taylor, a NAFCU economist, said inflationcontinues to rise, especially for the Fed's core personalconsumption index, which increased to an annualized 1.75%, and 2.3%for the last three months. "That's considered at the upper level oftheir comfort level," said Taylor, who expects the Fed to addanother 25 basis points to its target for overnight funds,currently at 2.75%. The Fed has raised the short-term rate sixtimes over the past nine months from a five-decade low of just 1%.The rise has proved profitable to credit unions, boosting intereston an estimated $30 billion of credit union funds invested in theovernight market by as much as $60 million annualized over thatperiod.

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