Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, February 5, 1994                   TAG: 9402050102
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-1   EDITION: METRO 
SOURCE: Newsday
DATELINE:                                 LENGTH: Medium

INTEREST RATES ARE GOING UP

The Fed announced late Friday morning that it was moving to increase the so-called federal funds rate - what banks charge each other for overnight loans - to 3.25 percent from 3 percent. It is the first increase in the rate in five years, and it led to widespread predictions of higher rates not only on investments, but also on a wide array of consumer loans, including home mortgages.

The announcement came in the form of a statement issued by Chairman Alan Greenspan, who had cautioned in congressional testimony Monday that slightly higher rates were in the offing. He said Friday that the decision was taken "in order to sustain and enhance the economic expansion."

Normally, the Fed says nothing about its actions. In this case, Greenspan said, the decision was made public "to avoid any misunderstanding."

Treasury Secretary Lloyd Bentsen called the rate increase "a small amount" and said it was "not unexpected." He also said the Fed is "an independent central bank, and we respect its independence."

Others saw the Fed's move as good politics. Rep. Henry Gonzalez, D-Texas, head of the House Banking Committee, has been leading a campaign to force the Fed to reveal more about its internal discussions. "This could have given a little more steam to Gonzalez's efforts," said Stephen Axilrod, vice chairman of Nikko Securities and a former Fed official. He described the Fed's public announcement as "unprecedented."

Gonzalez congratulated the Fed for disclosing its decision, but said he disagreed with it because he believes it will lead to an economic slowdown.