Fed Raises Key Interest Rate by Quarter Point

WASHINGTON - As expected, the U.S. Federal Reserve on Tuesday raised interest rates one quarter of a percentage point in a move to head off potential inflation.

The rate, now at to 1.5 percent has been raised twice this year, following a quarter point hike announced on June 30 after the last Federal Reserve board meeting.

The Fed, in a statement announcing its rate decision, referred to a ?EUR??,,????'??softness?EUR??,,????'?? in the economy that the central bank blamed on rising energy prices.

?EUR??,,????'??In recent months, output growth has moderated and the pace of improvement in labor market conditions has slowed. This softness likely owes importantly to the substantial rise in energy prices,?EUR??,,????'?? the Fed said in a statement outlining its rate decision. ?EUR??,,????'??The economy nevertheless appears poised to resume a stronger pace of expansion going forward.?EUR??,,????'??

Some analysts believed that the Fed would slow down on raising interest rates, including the possibility that rate would not be raised again until after the Nov. 2 elections. However, in noting that the economy appears poised to resume a stronger pace, another quarter point hike in the rate could occur at the conclusion of the Fed's September meeting.