The US Federal Reserve, anticipating an acceleration of economic growth after the current slow patch, strongly hinted it doesn't plan to take a breather in its campaign to push interest rates higher to keep inflation under control.
Economists had believed the Fed might pause in its credit tightening in September. But now they are saying they fully expect a third rate increase to come at the Fed's Sept. 21 meeting.
The central bank raised rates Tuesday for the second time this year, pushing its target for the federal funds rate up from 1.25 percent to 1.5 percent.
That move was immediately followed by a quarter-point increase in commercial banks' prime lending rate, the benchmark for millions of consumer and business loans, which climbed from 4.25 percent to 4.5 percent.
In a signal of its intentions, the Fed retained language it had used for its first quarter-point rate hike on June 30, saying it expected to proceed with increases "at a pace that is likely to be measured."
The Fed acknowledged the economy had slowed in recent months, commenting, "This softness likely owes importantly to the substantial rise in energy prices."
Still, the Fed said, "The economy nevertheless appears poised to resume a stronger pace of expansion going forward."
"This was a very confident statement that they released," said Jeff Kleintop, chief investment strategist for PNC Advisors in Philadelphia. "They brushed off the impact of energy prices and said the economy is poised to resume a solid pace of expansion."
While an incumbent running for re-election would normally not be happy to see the Fed raising interest rates in the heat of a campaign, analysts said US President George W. Bush can take comfort from the Fed's optimistic assessment.
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