Fed Likely to Raise Rate a Quarter-Point

Federal Reserve policy-makers probably will keep pushing up short-term interest rates into 2005 so that a relatively spirited economy doesn’t produce unwanted inflation down the road.

While the frequency of expected rate increases next year will depend on how economic activity and inflation unfold in the coming months, private economists say consumers and businesses should prepare themselves for higher interest rates.

With the economy moving solidly ahead, Fed Chairman Alan Greenspan and his colleagues will continue to boost a key short-term interest rate, which had been at extraordinarily low levels, to a more normal level. The pre-emptive increases should help protect the economy against a dangerous inflation flare-up.

Against that backdrop, economists predict Greenspan and his colleagues will increase the target for the federal funds rate to 2.25 percent from 2 percent on Tuesday, their last regularly scheduled session of 2004. The meeting got under way in the morning; an afternoon announcement was expected.

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