The U.S. Federal Reserve raised a key interest rate again Wednesday to 5 percent, from 4.75 percent. (Xinhua Photo)

    BEIJING, May 11 (Xinhuanet) -- The U.S. Federal Reserve raised a key interest rate again Wednesday to 5 percent, from 4.75 percent, and said that it may keep raising rates in the coming months to contain inflation but that the timing of any increases will depend on how the economy is doing.

    The central bank has been hiking rates for 22 months in a bid to keep inflation at bay. This is the 16th straight increase in 5 years and the highest since March 2001. Short-term rates were at historical lows when the Fed began its rate-hiking campaign in June 2004.

    "The committee judges that some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information," the Fed said in a statement, referring to the Federal Reserve Open Market Committee.

    "Basically, they're saying two things. Future action is data dependent and that they may very well pause in June in order to buy themselves some time. This increases the likelihood of a pause in June and is about as explicit as they will allow themselves to be," David Joy, chief market strategist with money manager RiverSource Investments, commented. 

    The Fed funds rate, an overnight bank lending rate, affects the rates consumers pay on credit cards, auto loans, home equity lines of credit and other types of debt. As such, several banks reported that they were increasing their prime lending rate to 8 percent after the Fed's announcement.

    In its statement, the Fed also said that "economic growth has been quite strong so far this year" but that growth "is likely to moderate to a more sustainable pace, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices."

    But despite concerns about rising energy prices, as well as signs that the economy is still healthy, there is a growing feeling among some economists and investors that the Fed risks hurting economic growth if it keeps boosting rates. 

    "The markets are left more confused after the announcement than before," said Richard Yamarone, chief economist at Argus Research in New York. "While there may be four or five points here in the statement that point to additional Fed rate hikes, I think there are four or five additional points that point to a pause."

    Other economists said the Fed was correct in giving itself more maneuvering room to deal with an economy that is at a turning point. Stuart Hoffman, chief economist for the PNC Financial Group, wrote in a note to clients. "While remaining on guard against higher inflation, particularly in light of elevated energy and commodity prices,"the Fed "has also given themselves the latitude to pause should the data suggest that the pace of economic activity is slowing." Enditem  (Agencies)

The U.S. Federal Reserve raised a key interest rate again Wednesday to 5 percent, from 4.75 percent. (Xinhua Photo)