Fed sends interest rates up

The US Federal Reserve boosted a key short-term interest rate by a quarter-point today as the central bank continued its campaign to keep inflation under control.

Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee, the panel that sets interest rates, boosted the target for the federal funds rate to 1.5%.

The funds rate, the interest that banks charge each other, had been at a 46-year low of 1% just six weeks ago when the Fed raised it to 1.25%, the first increase in four years.

The Fed action this week had been expected as analysts predicted the central bank would continue with its campaign to raise rates even in the face of last Friday’s report that showed job creation slowed to a near-standstill last month.

Analysts said that if the Fed had decided to forgo its widely expected rate hike it would have raised concerns in financial markets that the central bank was worried that the current economic slowdown, which Greenspan has termed a “soft patch,” was threatening to become more severe.