Fed raises rates again, keeps options open for June

The Federal Reserve raised short-term interest rates again on Wednesday, its 16th increase in two years, and gave itself room to raise them again in June.

The Federal Reserve raised short-term interest rates again on Wednesday, its 16th increase in two years, and gave itself room to raise them again in June.

As expected, the central bank hiked the federal funds rate on overnight loans between banks another quarter-point, to 5 per cent. But it also damped hopes of some investors that it might stop or at least pause before raising rates again. In its statement, the Fed asserted that ‘‘some further policy firming may yet be needed,’’ a signal that policy makers are leaning toward at least one more increase. But it also took care to keep its options open.

Wednesday’s statement illustrated the uncertainty that confronts the Fed and its chairman, Ben S. Bernanke, as policy makers prepare to shift gears to a more neutral stance after two years of raising rates.

However, Bernanke asserted that future decisions would be guided by economic data rather than by a preordained strategy. ‘‘The extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information,’’ the central bank said.

Some analysts said Bernanke was sending a tougher message about the need to head off potential inflation. The Fed’s statement, which is supposed to convey the views of the entire Federal Open Market Committee, did not repeat Bernanke’s suggestion last month to lawmakers that the Fed might pause in its rate increases.

Ian Shepherdson, an economist at High Frequency Economics, a research firm, said the Fed might still refrain from raising rates at its next meeting, set for June 28 and 29, because it would probably have more data by then that show a sharp slowing in the economy.

‘‘I am very sure that the incoming data, particularly consumer confidence numbers, are going to tank,’’ Shepherdson said. In their statement on Wednesday, Fed policy makers noted that economic growth has been very strong so far this year. But they repeated their view that growth, which rose to an annual rate of 4.8 per cent in the first three months of this year, would moderate as a result of a cooler housing market and the lagging effects of higher interest rates and energy prices.