DATE: Wednesday, March 26, 1997             TAG: 9703260667

SECTION: FRONT                   PAGE: A1   EDITION: FINAL 

                                            LENGTH:   34 lines

WHAT HIGHER INTEREST RATES MEAN TO YOU

As expected, the Federal Reserve boosted a key interest rate Tuesday by a quarter of a percentage point. The federal funds rate, which banks charge each other for overnight loans, was raised to 5.50 percent.

Who will be affected by the increase?

Business borrowers, homeowners using home equity lines of credit and some credit-card users will feel the impact more quickly than others.

Why did the Fed take this action?

The Federal Reserve has expressed worry that a rapid business expansion could fuel inflation. Although inflation has been subdued in recent months, the Fed wants to root out any expectation among borrowers and investors that inflation will heat up.

Who are the people who made the interest-rate decision?

The Fed's Open Market Committee, which includes the five members of the Federal Reserve Board of Governors and the president of the Federal Reserve Bank of New York. The presidents of the 11 other Federal Reserve banks take turns serving on four seats on the Open Market Committee.

Are there more rate increases in the works?

That's the question bankers and economists are asking themselves. The Fed's Open Market Committee, the body responsible for setting monetary policy, will meet again in May. MEMO: Main story on page D1.

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