Fed Raises Key Interest Rate to Highest Level in More Than 4 Years

The Federal Reserve, still concerned about inflation, raised a key interest rate on Tuesday to the highest level in more than four years and signaled more increases are likely.

The Fed announced it was pushing its target for the federal funds rate, the interest that banks charge each other, to 4 percent from 3.75 percent, where it had been since the Fed's last interest-rate meeting on Sept. 20.

It marked the 12th consecutive quarter-point increase since the Fed began gradually raising rates in June 2004 to make sure that a growing economy did not generate higher inflation.

Higher interest rates fight inflation by slowing economic activity. The higher rates dampen consumer demand for such items as autos and homes and raise the cost of borrowing for businesses.