Federal Reserve Raises Interest Rates

September 20, 2005 (PLANSPONSOR.com) - The Federal Reserve raised US interest rates for the 11th straight time, Reuters reports.

The Federal Open Market Committee approved 9-1 a quarter of a percentage point increase in the benchmark federal funds rate to 3.75%.   The benchmark federal funds rate is the rate charged on overnight loans and is intended to influence credit costs in the economy.

The Federal Reserve noted that it believes Hurricane Katrina will only be a temporary setback to the economy.

Federal rates are relevant for plan sponsors since many defined contribution plan loans use the prime rate for amortization.

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