Wednesday, May 04, 2005

Fed raises target rate to 3%

Long-term mortgage rates still low

The Federal Reserve today decided to raise its target for the federal funds rate by 25 basis points to 3 percent, saying pressures on inflation have picked up in recent months.

In a statement from the Federal Open Market Committee, the Fed said its stance of monetary policy remains accommodative, and "coupled with robust underlying growth in productivity, is providing ongoing support to economic activity."

Rates on long-term mortgages so far have not followed suit. Most economists, however, predict a gradual rise in rates over the course of the year.

The Fed also said today that "recent data suggest that the solid pace of spending growth has slowed somewhat, partly in response to the earlier increases in energy prices. Labor market conditions, however, apparently continue to improve gradually. Pressures on inflation have picked up in recent months and pricing power is more evident. Longer-term inflation expectations remain well contained."

Read the entire Inman News story at Citywide Services

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