Prime Rate

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Wednesday, September 22, 2004

Prime Rate Hike: The Wall Street Journal Prime Rate Goes Up By 25 Basis Points

The cost of energy continues to hurt all types of businesses, and with no relief from gas price increases in sight, I find it quite unbelievable that The Fed has decided to make borrowing more expensive by raising interest rates. You know, there are some out there who think that the aim of the current administration is to get America's lower classes completely dependent on credit and borrowing by making the necessities of life too expensive to acquire with good old fashioned cash. Well, let's look at the evidence: ordinary, middle class Americans are being forced to charge everything from gas for their cars to fuel oil to heat their homes. Conspiracy? Maybe. But one thing is for sure: The big oil companies, the banks and the major credit card companies are all earning big profits, while record numbers of Americans are giving up and giving in to the cold embrace of bankruptcy.

The Wall Street Journal Prime Rate has gone up by 0.25 percentage points, and is now 4.75%. The Fed Funds Rate has been raised to 1.75%. Notes from The Fed* below:

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 1-3/4 percent.

The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. After moderating earlier this year partly in response to the substantial rise in energy prices, output growth appears to have regained some traction, and labor market conditions have improved modestly. Despite the rise in energy prices, inflation and inflation expectations have eased in recent months.

The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters to be roughly equal. With underlying inflation expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.

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