Here Comes Inflation: Fed Bumps Interest Rate

The Federal Reserve decided Thursday to boost the rate banks pay for emergency loans. The action is part of a broader move to pull back the extraordinary aid it provided to fight the worst financial and economic crisis since the 1930s.

The Fed portrayed its action as moving its emergency program for banks closer to normal. But the markets saw it initially as a prelude to higher borrowing costs across the board.

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Today the January producer price index went up 1.4%, annualized at 16.8% -- which if it keeps up, will soon be close to the inflation rate.