Fed Makes Rate Hike Despite Lack of Inflation

As expected, the Federal Reserve has boosted a key short-term interest rate at the last US central bank meeting that Janet Yellen is expected to lead, the AP reports. Fed officials ended their two-day meeting by hiking the federal funds rate—what banks charge each other for short-term loans—to a range of 1.25% to 1.5%. The Fed chose to raise the rate despite inflation running consistently below its 2% target. Rate hikes are usually intended to limit inflation, but Fed officials appear to assume that continued rate increases won't stop inflation from climbing above its current 1.6% level. Seven officials voted for the increase. Two opposed, likely due to the lack of inflation: Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari. (More Federal Reserve stories.)