Interest Rates Rising Again

Knoxville — The Federal Reserve raised short-term interest rates by a half percentage point Tuesday in an effort to slow the United States economy.

A University of Tennessee economist said low unemployment levels are boosting the risk of inflation.

“There are some very tight labor markets virtually anywhere you go in the country,” said Dr. Matt Murray. “At some point you are likely to see wage pressures build, and inflation will rear its ugly head.”

The Fed raised its discount rate to 6 percent, the highest level since August 1991. The half percentage point increase was the largest increase in 5 years.

But Murray said unemployment will not stay low indefinitely.

“We seemingly have exceeded our capacity to create jobs,” Murray said. “We’ve been able to do it month by month, year by year, but at some point, our ability to sustain job growth will run out.”