Fed nudges interest rates slightly higher

WASHINGTON — The Federal Reserve’s philosophy on interest rates: What goes down must go back up.

Slowly.

The Federal Reserve pushed short-term interest rates slightly higher Wednesday, part of a slow-motion campaign begun last June and expected to continue well into this year to keep inflation and the economy on an even keel.

Fed Chairman Alan Greenspan and his colleagues raised the target for the federal funds rate by one-quarter of a percentage point, to 2.50 percent, in the sixth such increase since last summer. The rate is the interest that banks charge each other and is the Fed’s main lever for influencing economic activity.

In a brief statement released after the Fed’s two-day meeting, policy-makers stuck to their gradual approach of raising rates. Further increases can be “at a pace that is likely to be measured,” according to the statement, similar to one issued at the previous meeting in December.

“All the stars seem to be aligned to support a gradualist approach,” said Anthony Chan, senior economist at JPMorgan Fleming Asset Management.

The Fed said the economy is growing “at a moderate pace despite the rise in energy prices, and labor market conditions continue to improve gradually.” Inflation, the Fed said, remains “well contained.”

On Wall Street, the Fed’s action helped to boost stocks. The Dow Jones industrials gained 44.85 points to close at 10,596.79.

In response to the Fed’s action, Wells Fargo lifted its prime lending rate by one-quarter of a percentage point, to 5.50 percent. This rate, used for many short-term consumer and business loans, moves in lockstep with the funds rate.

Other commercial banks followed suit.

Economists predict the Fed will raise the funds rate again at its next meeting, in March.