Tuesday, August 09, 2005

Fed Likely to Raise Rates a Quarter-Point

Get that new house soon. Interest rates are coming up again:

Federal Reserve Chairman Alan Greenspan and his colleagues are meeting Tuesday to discuss what to do with interest rates.

There was a widespread expectation that the Fed will raise interest rates by a quarter-point. That would be the 10th consecutive increase in the Fed's target for the federal funds rate, the interest that banks charge each other.

The move would push the rate to 3.5 percent, the highest level since August 2001 and more than triple the 46-year low of 1 percent that was in effect before the Fed started raising rates in June 2004.

Although economists once expected the Fed to pause for awhile in its rate hikes, many now believe the central bank will keep pushing rates higher at each of the remaining three meetings this year, leaving the funds rate at 4.25 percent by year's end.

Even with today's expected bump, we are still enjoying some temptingly low rates for those interested in buying a house or refinancing the one they have. This is an enviable time we live in -- where the economy is doing well enough to warrant a rate-hike and yet those rates are still low enough to grab some bargain loans.

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