WASHINGTON -- The Federal Reserve raised short-term interest rates another half of a percentage point yesterday to quell future inflation, but signaled that it would be the last rate increase for awhile.

The Federal Open Market Committee raised the federal funds rate to 4.75% from 4.25% and the seven Fed governors unanimously decided to increase the discount rate to 4% from 3.5%, the Fed said.

"These measures were taken against the background of evidence of continuing strength in the economic expansion and high levels of resource utilization," Fed officials said in a prepared statement. "But these actions are expected to be sufficient, at least for a time, to meet the objective of sustained, noninflationary growth."

The federal funds rate is what banks charge each other for overnight loans and the discount rate is what the Fed charges banks for such loans.

The rate increase was widely expected by analysts, with predictions ranging from just a quarter point rise on the fed funds rate to a half point increase on both rates.

"They went for the full amount rather than coming back in a month or two and raising rates another quarter of a point," said Stuart Hoffman, chief economist of PNC Bank Corp. in Pittsburgh.

The FOMC meets next in late September then again in mid-November. Hoffman along with other analysts predicted the Fed will stand pat on short-term rates at least until the November meeting.

Fed officials will want to sit back and see how financial markets react to the move and how fast economic growth slows in the coming months, said Hoffman, who did not role out another rate increase somewhere down the road.

Meanwhile, a few analysts, including Edward Campbell, senior economist of Brown Brothers Harriman & Co., speculated that yesterday's tightening may be the last during this business cycle because growth is likely to slow to a rate at or below what Fed officials would consider sustainable.

"I would say a half point move is aggressive; it's more than the economy needs right now," Campbell said.

While sidestepping whether the rate increase was warranted, Clinton Administration officials did say the move does not threaten future growth.

"We believe the economy will remain healthy, led by continued strong investment spending," Treasury Secretary Lloyd Bentsen and Laura D'Andrea Tyson, the head of the President's Council of Economic Advisers, said in a joint statement. "So far, the news on inflation has been very good," they said.

The statement tried to show that the administration and Fed are not at odds over the move. "Given the strong gains in output and employment so far this year, we need to be watchful for signs of developing price pressures," Bentsen and Tyson said.. "The administration recognizes and respects the independence of the Federal Reserve."

Meanwhile, leading congressional Democrats sharply criticized the Fed for its action.

"Once again, Chairman [Alan] Greenspan and the Federal Reserve have mugged America," said Rep. Henry Gonzalez, D-Rex., chairman of the House Banking Committee, in a prepared statement.

Sen. Jim Sasser, D-Tenn., said, "The Federal Reserve Board today launched another salvo of friendly fire upon the economic recovery, despite overwhelming evidence that inflation is no threat."

Yesterday's move was the fifth tightening by the Fed this year. The last move came on May 17, when the Fed raised both the federal funds rate and the discount rate by 50 basis points.

So far this year, the Fed has raised the federal funds rate to 4.75% from 3% and the discount rate to 4% from 3%.

The 12-member FOMC consists of the seven governors, the president of the New York Fed bank, and four other regional Fed bank presidents who sit on the committee on a rotating basis. Yesterday's meeting was the first this year where the committee had all 12 members in place and participating.

Alan Blinder became the vice chairman of the Fed's board of governors in May, replacing David Mullins Jr., and Janet Yellen was sworn in as a Fed governor last week, replacing Wayne Angell.

Blinder and Yellen are Clinton appointees, and both were criticized before joining the Fed as being potentially soft on inflation. Both voted for the half point gain on the discount rate.

The vote on the federal funds rate will be revealed in the FOMC minutes that will be released a few days after the next FOMC meeting in late September.

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