Fed Up Again On Short-TermRates

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WASHINGTON - (09/21/05) -- The Federal Reserve boostedshort-term rates again Tuesday, and signaled more rate hikes arelikely in the wake of Hurricane Katrina. Tuesday's action raisedthe target rate for overnight Fed Funds by 25 basis points, to3.75%, the 11th raise of 25 bps over the past 18 months. In a briefstatement explaining the action, the Fed said that all the problemsfrom Katrina "will be a setback in the near term'' for the economy.But the Fed said it did not believe that Katrina would pose a "morepersistent threat'' and therefore believed it needed to continueraising interest rates to guard against inflation. The Fed's rateincrease spurred several large banks to immediately raise theirprime rate by 25 bps, too. That pushed the prime to 6.75%, itshighest point in more than four years.

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