Fed Policy-Makers Concerned About Rate Hike Impacts on Economy

WASHINGTON — Federal Reserve policy-makers at their August meeting halted their rate-raising campaign for the first time in two years, expressing concern that they didn't want to push up rates too much and hurt the economy.
By taking a breather, the Fed would have time to assess the toll on economic activity and inflation of its 17 rate increases since 2004, according to minutes of the Fed's Aug. 8 meeting, released Tuesday. It can take time for rate increases to work their way through the economy.
"The full effect of previous increases in interest rates on activity and prices probably had not yet been felt, and a pause was viewed as appropriate to limit the risks of tightening too much," the minutes said.

The Fed's goal is to push up rates to thwart inflation but not so much as to cripple economic activity. It's a tricky task, economists say.
Fed chief Ben Bernanke and all but one of his central bank colleagues voted to hold the federal funds rate steady at 5.25 percent at the August meeting. The funds rate, the interest banks charge each other on overnight loans, affects a variety of other interest rates charged to businesses and consumers. It is the Fed's main tool to influence the economy.


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