US Federal Reserve raises interest rates - energy prices could affect inflation

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Wednesday, March 29, 2006

The US Federal Reserve has raised the federal funds rate by 25 basis points (a quarter of a percent) to 4.75%. The Federal Open Market Committee said, "Economic growth has rebounded strongly in the current quarter but appears likely to moderate to a more sustainable pace." The commmittee also said that the recent rise in energy prices has had a small effect on inflation and increasing productivity has offset growing labor costs which has helped keep inflation modest. However, the rise indicates the advent for future wariness over the state of the economy, with huge budget deficits yet to ofset it seams unlikely that the rates will decrease in forthcoming years, The federal chairman Ben Bernanke appeared at the senate board in the pursuit to implicitly state the statusquo worries.

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