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Interest-Rate Increase Follows Expectations

NEW YORK CITY-In his first meeting since taking the post, Federal Reserve chairman Ben Bernanke leaves the door open for another rate hike in May.

By Melissa Kress | Updated on March 28, 2006

NEW YORK CITY-In a move closely watched for who as much as what, the Federal Reserve has inched up short-term interest rates an additional quarter percent this afternoon, bringing the figure to 4.75%. It was the 15th straight time–since June 2004–that the Fed increased interest rates, and the move was not unexpected. However, since it is the first Fed meeting since chairman Ben Bernanke was sworn in Feb. 6, all eyes and ears were on his statement, not his action.

Under former chairman Alan Greenspan, the Fed’s statements have included talks of a “measured hike.” Since January, the wording has been removed from the statements and industry followers have wondered if it meant the country, and the Federal Reserve, was moving into its target range, explains Janice Stanton, senior managing director of Cushman & Wakefield’s Capital Markets Group.

Today’s statement explains there is “the potential to add to inflation pressures” and leaves the door open for the Fed to raise rates again in May, although “it’s not a foregone conclusion,” Stanton adds. “It’s basically saying ‘let’s see what happens with inflation.’”

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