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Fed Ups Rates 1/4-Pt., 1st Rise In Four Years; "Measured' Pace Seen; Factory Growth Slows A Lot; Decision was no surprise, but stocks, bonds rally on gradual hike promise.(A)
Byline: JED GRAHAM
The Federal Reserve raised its key interest rate a quarter point from a 46-year low on Wednesday while saying it expects future rate hikes to come at a measured pace.
With the economy continuing to show solid growth and job creation now healthy, the Fed began slowly withdrawing its aggressive monetary stimulus with the first rate hike in four years.
But the Fed's policy-setting committee left the door open for faster rate hikes if its forecast of "relatively low" inflation is off the mark.
"The Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability," the Fed said in a statement announcing the rate hike.
The Fed's statement noted that "incoming inflation data are somewhat elevated," but policy-makers attributed part of the increase "to transitory factors."
With just one more set of inflation reports ahead of the August 10 meeting, the Fed is unlikely to decide by then that the pickup in pricing pressure isn't temporary but "the leading edge of something undesirable," said Josh Feinman, chief economist at Deutsche Asset Management.
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