US Federal Reserve lifts interest rates

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Tuesday, September 20, 2005

Federal Reserve HQ in Washington, D.C.

The US Federal Reserve has just raised the base rate of interest for the 11th month in a row, despite concerns that the economy will slow after Hurricane Katrina.

The rate rose by a quarter of a percentage point to 3.75%, but analysts have predicted it may rise to 4.5% in the coming months, in spite of consumer spending being down. The Fed says it is hoping to counter soaring house prices and the high price of oil.

Economic growth in the US this year is forecast at around 3.3%, but government officials estimate that 0.5% growth could be lost due to Hurricane Katrina.

However, analysts are confident that the economy is robust enough to withstand and shake off the effects of high oil prices and unemployment caused by Hurricane Katrina.