Fed Again Boosts Rates

November 10, 2004 (PLANSPONSOR.com) - Federal Reserve policy makers continued on their interest-rate raising ways as they jacked up US rates by a quarter percentage point for the fourth time in 2004.

The decision Wednesday by the Fed’s Open Market Committee moves the benchmark federal funds rate – which affects credit costs throughout the economy – to 2% from 1.75%. The committee also boosted the discount rate to 3%.

Also as expected, the central bank said risks to the US economy were balanced between weaker growth and higher prices.“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,” committee members said in their customary post-meeting statement.

As it has in the past, the FOMC asserted that, with underlying inflation risks low, it can continue to boost rates at a “measured” pace. “ Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability,” the statement again warned.

Interest-rate movements are relevant to plan sponsors because many K plan loans are tied to the Prime Rate.