Jan. 31 (Bloomberg) -- Federal Reserve policy makers, meeting for the final time under Chairman Alan Greenspan, raised the main U.S. interest rate to 4.5 percent and suggested the run of increases is still not finished.
Fed officials stopped saying rates may rise at a ``measured'' pace, a phrase used at each meeting since May 2004. ``Some further policy firming may be needed'' to ensure the economy can grow without stoking inflation, the Federal Open Market Committee said in a statement after meeting today in Washington.
The 14th straight rate increase was Greenspan's final stamp on Fed policy, which he steered since August 1987 through a record 10-year expansion and two short recessions. The chairman, 79, retires today and turns over the Fed to White House economic adviser Ben S. Bernanke, 52, who was confirmed by the Senate today and will be sworn in at the Fed at about 9 a.m. tomorrow.
``The door is open to further rate increases,'' said John Ryding, chief U.S. economist at Bear Stearns & Co. in New York, in an interview. ``They're no longer pre-committed, but they're definitely leaving the door open, and I think the Bernanke Fed will push on that door on March 28th with another quarter-point rate hike.''
The benchmark 10-year note's yield fell 1 basis point, or 0.01 percentage point, to 4.52 percent at 5:15 p.m. in New York.
Greenspan hasn't made a public comment on the economic outlook since a Dec. 2 speech, in which he said that ``despite the disruptions of Hurricanes Katrina, Rita, and Wilma, economic activity appears to be expanding at a reasonably good pace as we head into 2006.''
In his most recent comments on prices, Greenspan told the Joint Economic Committee of Congress on Nov. 3 that there is ``more uncertainty'' about the outlook for inflation.
With today's action, the Fed's rate is 2.25 percentage points above the European Central Bank's refinancing rate, 1 percentage point higher than the Bank of Canada's overnight rate, and the same as the Bank of England's base lending rate.
Today's statement said 11 of the 12 regional Fed banks sought an increase in the discount rate, or the cost of direct loans to commercial banks, a signal that they wanted an increase in the Fed target. The discount rate rose a quarter-point to 5.5 percent. The Minneapolis Fed was the lone bank not to submit a request
