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Fed Lifts Rates 16th Straight Time
Channel 3000
May 10, 2006

NEW YORK --  If you need a loan, it's likely to cost more in the months ahead.

The Federal Reserve boosted short-term interest rates on Wednesday -- the 16th increase since June 2004.

The Fed added one-quarter of a percentage point to a short-term interest known as the federal funds rate.

That puts the funds rate, the interest banks charge each other on overnight loans, at 5 percent.

In response, commercial banks were expected to raise their prime lending rate -- for certain credit cards, home equity lines of credit and other loans -- by a corresponding amount to 8 percent.

Those moves will leave borrowing costs at their highest in five years.

But policy-makers also indicated that they may now take a pause in their rate-raising campaign to assess the impact of the rate hikes.

In a statement, the policy-makers said the "extent and timing" of further rate increases will depend on future economic data.

The goal of the central bank has been to push rates up to slow the economy and keep inflation in check.

The impact of the rate increases is most obvious in the housing market.

Financial analyst Greg McBride of Bankrate.com said "the average home equity line has nearly doubled in the past two years."

McBride said Wednesday's rate hike will "push consumer borrowing costs still higher."

He said borrowers could face an unpleasant jump in adjustable rate mortgages. But the "bright side" is fixed-rate mortgages are "an attractive refinancing alternative."

Original Text

The Fed Funds Rate is still significantly lower than it was before the Federal Reserve through us into a recession in 2001. In fact, during the booming Clinton years, Fed fund rate went from 4.74% in May 1999 to 6.54% in July 2000 (by March 2001 we were in recession). Today, we're only at 5%. As soon as democrats take control of Congress we can expect a massive increases in interest rates (because the Fed's been propping up the GOP).