FOMC Approves 17th Consecutive Rate Increase

June 29, 2006 (PLANSPONSOR.com) - The Federal Open Market Committee (FOMC) raised the federal funds interest rate a quarter percentage to 5.25 percent.

In its  press release , the FOMC said it raised its target for the federal funds rate in response to a moderation in economic growth. According to the release, the economic growth moderation stems partly from a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.

The raised target should offset core inflation, which has been elevated in recent months, the committee noted in the release, but there is still a risk of inflation.

The increase is the 17th consecutive increase approved by the FOMC.

The rate is of concern for plan sponsors since most retirement plan loans use an interest rate based on the prime rate.

The Board of Governors also unanimously approved a 25-basis-point increase in the discount rate to 6.25 percent.

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