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US Federal Reserve raises U.S. interest rates a 14th straight time

US Federal Reserve on 31st January 2006, on the final day of Chairman Alan Greenspan's 18-1/2 year tenure, raised U.S. interest rates a 14th straight time. Benchmark federal funds rate has been increased a quarter-percentage point to 4.5 percent, the highest since April 2001. The Fed next meets March 28.

In its accompanying statement, the policymaking Federal Open Market Committee said “some further policy firming may be needed” to keep the outlook for sustainable growth and price stability in balance, dropping the reference to “measured” policy firming that was included in December.

By changing the language in its statement, Fed policymakers were attempting to avoid the impression of committing Ben Bernanke, the new Fed chairman, to further increases, while signalling that further rate increases remained likely, depending on the economic data.

The federal funds rate is now virtually the same as the yield on two-year and 10-year Treasury notes. As well as reflecting expectations that inflation will remain under control, the flat yield curve suggests investors expect the Fed will have to cut the federal funds rate from its peak level by the end of this year.

Over the period, growth and inflation have averaged 3.1 per cent and unemployment 5.5 per cent.

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