WASHINGTON, D.C. (May 10, 2006) — The Federal Open Market Committee (FOMC) raised the benchmark federal funds rate 25 basis points to 5 percent—the Fed's 16th straight increase.
The FOMC also left open the possibility of more rate increases. “The extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information,” the committee said in a statement.
The Fed said economic growth has been “quite strong” this year, yet growth is likely to moderate to a sustainable pace as the housing market cools and the effects of interest rate and energy price increases catch up.
The run-up of energy and other commodities has only had a modest effect on core inflation, the Fed said. The elevated prices still could add to inflation pressures, the FOMC added.
The FOMC also raised a 25-basis-point increase in the discount rate to 6 percent.