MONETARY POLICY

FED RAISES KEY INTEREST RATE TO FOUR-YEAR HIGH OF 3.5%

The Federal Reserve, citing “elevated” price pressures in the American economy, boosted its key interest rate to a four-year high yesterday and said it aims to extend the campaign of gradual interest-rate increases it began in mid-2004.

Amid signs the economy is gaining speed despite record oil prices, Fed policymakers voted unanimously to raise the key federal funds rate a quarter percentage point to 3.5%. The increase, the tenth since June 2004, made the campaign of rate hikes the longest since Alan Greenspan became Fed chairman in 1987.

“Aggregate spending, despite high energy prices, appears to have strengthened since late winter, and labor-market conditions continue to improve gradually,” the Fed’s Open Market Committee said in a statement. It reasserted its previous view that “pressures on inflation have stayed elevated” but added that “core inflation has been relatively low in recent months and longer-term inflation expectations remain well-contained.”

The committee hinted it intends to raise the funds rate at least once more, possibly as early as September 20, saying the rate remains too low – “accommodative” in Fed parlance. It pledged, however, to raise the rate in “measured” increments. That phrase so far has signified increases of a quarter percentage point at a time.

The decision, widely expected on Wall Street, came as economic forecasters began to reassess their views on how much more the Fed will need to raise the funds rate to hold inflation down. Until a few weeks ago, most forecasters expected the Fed to “pause” its interest-rate campaign later this year, possibly opting to forgo a rate increase in December.

– Dow Jones Newswires

IN THE COURTS

FORMER WORLDCOM ACCOUNTING DIRECTOR SENTENCED TO ONE YEAR

A former accounting director at WorldCom, Buford “Buddy” Yates Jr., was sentenced to one year and one day in prison yesterday in connection with a massive accounting fraud at the one-time telecommunications giant.

U.S. District Judge Barbara Jones also sentenced Yates to three years supervised release following the completion of his prison term and ordered him to pay a $5,000 fine within the next 60 days. Yates, 49 years old, pleaded guilty to conspiracy and securities fraud in 2002 and cooperated with the government in its investigation. He had faced as much as 17 years in prison.

He is the only one of five executives who pleaded guilty to criminal charges in the matter who didn’t testify earlier this year at the trial of Bernard Ebbers, World- Com’s ex-chief executive.

– Dow Jones Newswires

REGULATION

SEC CONTACTS REEBOK IN POTENTIAL INQUIRY OF INSIDER TRADING

Reebok has been contacted by the Securities and Exchange Commission in connection with the agency’s investigation into possible insider trading at the time of last week’s news that the footwear firm was being acquired by Adidas-Salomon AG.

The disclosure was made yesterday morning at a press briefing at Reebok’s corporate headquarters.

“The investigation involves Reebok shares, and the matter is in the hands of our attorneys,” the chairman and chief executive of Reebok, Paul Fireman, said. Mr. Fireman denied that the company had “anything to do with” the trades and that it is “fully cooperating with the SEC.”

The government’s investigation is focused on the purchase of approximately 8,700 stock options early last week and the subsequent sale of the securities after Reebok shares surged on news of the proposed takeover. Traders reaped an estimated $8 million in profit.

– Dow Jones Newswires

TECHNOLOGY

MICROSOFT REACHES $7M SETTLEMENT WITH SENDER OF SPAM E-MAIL

Microsoft announced a settlement with a large sender of spam e-mail, the latest sign of progress in a continuing war against the unsolicited commercial messages.

Under the settlement, Scott Richter has agreed to pay $7 million and cease sending unsolicited bulk e-mail known as spam. The settlement marks a final phase in a suit that was filed in December 2003 by Microsoft and New York Attorney General Eliot Spitzer against Mr. Richter, president of Optinrealbig.com, a Westminster, Colo., e-mail marketing company.

– Dow Jones Newswires