Oops, they did it again.

June 29, 2006

The central bank’s Federal Open Market Committee raised the target federal funds rate by a quarter point, to 5.25 percent. The prime rate will rise to 8.25 percent. Some types of consumer debt, such as variable-rate credit cards and equity lines of credit, go up and down with the prime rate.

The Fed’s actions have only an indirect effect on the rates of longer-term debt, such as fixed-rate mortgages and auto loans. Those rates have been rising recently, mostly because bankers and investors worry that inflation could accelerate, and partly in anticipation of this Fed increase.

The good news is the central bank hinted that at least one more rate increase is likely, but that there probably won’t be many more. With any luck the rates will not continue higher. See www.federalreserve.gov for more information.


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