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Tuesday, March 28, 2006 

Fed Increases Interest Rate to 4.75 Percent

Today Federal Open Market Committee voted unanimously to raise the benchmark federal funds rate target a quarter percentage point to 4.75 percent. This is 15th straight hike and it stands at the highest level since April 2001. Now for an average consumer since it influences prime rate it'll make any kind of borrowing such as credit cards, home equity lines and second mortgage rates, attached to prime rates more expensive. At the same time it'll have a positive affect on interest rates for CDs, MMAs.

It is quite possible that during this year there will be another one or two increases of quarter percentage points before Feds put a hold. In my opinion it will be a good time to move some money to long term (2-3 years) CDs, it may give better returns as compared to equities.