Fed Raises Rates for Third Time This Year; Adopts Neutral Bias

The Federal Reserve raised interest rates by 25 basis points today, raising its target for the fed funds rate to 5.50% from 5.25%. Wall Street was evenly split on whether the Fed would hike or not, but the Fed was apparently concerned enough about rising inflation to boost rates for a third time this year.

In its announcement, however, the Fed said it was adopting a neutral directive, after adopting a bias toward raising rates at the Oct. 5 meeting. This indicates the Fed has no predilection toward raising or lowering rates at the next meeting, Dec. 21, the last of the year.

Most believe this will be the Fed's last move in 1999. Only the Dec. 21 Federal Open Market Committee meeting remains, and the committee is expected to stand pat due to concern about potential economic disruptions related to the Y2K date change. Beyond that, Y2K threatens to distort economic data too much for the Fed to get a clear read. ...