Fed expected to boost rates today

WASHINGTON -- Oil prices are surging and wages are growing at the fastest clip in a year, reasons enough for the Federal Reserve to keep pushing interest rates higher the rest of the year and probably well into 2006 in an effort to keep inflation in check.

The Fed is expected to raise short-term rates a quarter-point today, the 10th increase since June of last year.

Despite that long campaign to tighten credit, rates still are too low, Federal Reserve chairman Alan Greenspan and his colleagues have suggested.

''The Fed has much more work to do in tightening interest rates," said Mark Zandi, chief economist at Economy.com.

''We will see bigger pay increases going forward, and businesses will try to defend their profit margins by raising their prices more aggressively," Zandi predicted. ''So I do think market pressures are developing that signal stronger inflation ahead."

Fighting inflation is job number one at the Fed. A 10th increase today would lift the funds rate, the interest that banks charge each other on overnight loans, to 3.50 percent.

In response, commercial banks are expected to boost their prime lending rate, used for many short-term consumer loans, by a corresponding amount, to 6.50 percent.