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Interest rates
rise by a quarter-point
Aug 11, 2004
The Federal Reserve increased its benchmark short-term interest
rate to 1.5 percent – a jump a quarter-point. This was
a move followed by all the major lenders, who also increased
their rates by the same quarter point amount.
This is only the second interest rate increase in four years
and signals the Federal Reserve’s intent of dampening
inflation through small interest-rate increases as the economy
strengthens and job creation picks up.
Although this move was largely expected by the analysts, some
believed that is may have been put off because of the disappointing
employment growth over the previous two months, with the growth
in July being the weakest since December and way below the predicted
levels – only reaching around a sixth of what was expected.
Despite these issues, and the relatively low rise in worker
productivity the Open Market Committee remained positive about
the future of the economy, stating "The economy nevertheless
appears poised to resume a stronger pace of expansion going
forward".
This positive assessment of the future of the economy has buoyed
the stock markets, with many seeing large increases yesterday
– the Dow Jones rose by 130 points with the three major
markets recording their largest gains in two months.
Some analysts believe that the committee will be forced to leave
the interest rates unchanged in their next meeting on September
21 due to the uncertainties of increasing energy prices, something
that would also keep the central bank away from the spotlight
in the run-up to the presidential election. |
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