WASHINGTON — In Alan Greenspan's world, inflation is a bigger threat to America's long-term economic health than the devastation wrought by Hurricane Katrina.

For that reason, the Federal Reserve decided yesterday to keep pushing up interest rates, with the goal of fending off inflation even as the country deals with fallout from the costliest natural disaster in its history.

Taking no break in a 15-month rate-raising campaign, contrary to some speculation, Fed Chairman Greenspan and his colleagues opted to raise an important short-term interest rate by one-quarter percentage point to 3.75 percent. It marked the 11th increase of that size since the Fed began to tighten credit in 2004.

The Fed made clear that fighting inflation remained its No. 1 job. Fallout from the storm doesn't pose a "persistent threat" to the nation's economic health, policymakers said.

In response to the Fed's action, commercial banks began raising their prime lending rates by a corresponding amount, to 6.75 percent. These rates are used for many short-term consumer loans, including some credit cards and popular home equity lines of credit.

The increases pushed borrowing costs to their highest level since the summer of 2001.

Fed policymakers held the door open to additional rate increases in the months ahead — depending on how economic activity and inflation unfold.

Much of the Fed's brief statement — issued after its closed-door meeting — was devoted to looking at the economic impact of Katrina, which slammed the Gulf Coast in late August, knocking out oil facilities and destroying businesses, homes and lives.

High energy prices made worse by the storm "imply that spending, production and employment will be set back in the near term," Fed policymakers said. Disruptions to oil and gas supplies may add to energy price gyrations, they said.

Policymakers struck a hopeful tone that such economic fallout would not be long lasting.

"While these unfortunate developments have increased uncertainty about near-term economic performance, it is the (Fed's) view that they do not pose a more persistent threat," the policymakers concluded.

Fed policymakers observed that before Katrina struck, the economy was moving ahead at a "good pace." Economists said the Fed was trying to convey the sense that because the economy was in such good shape, it should be able to weather the jolt from the storm reasonably well.

Analysts said the economy is resilient and is expected to bounce back.

For now, Katrina is expected to reduce overall economic growth in the second half of this year by as much as 1 percentage point as high energy prices crimp consumer and business spending.

Hiring is expected to slow. A reduction of 400,000 jobs over the next four months is forecast.

In sticking to their rate-raising course, though, Fed policymakers suggested that the risk that high energy prices could touch off broader inflation was greater than the threat of slower economic activity.

"Higher energy and other costs have the potential to add to inflation pressures," the Fed policymakers said.

Oil prices on Monday shot up more than $4 a barrel — the biggest one-day price jump ever — because of worries that a new storm could further hobble oil production facilities on the Gulf Coast. Prices calmed down yesterday.

President Bush wants Congress to approve a massive reconstruction program for the Gulf Coast. The federal government's costs could reach $200 billion or more. Congress already has approved $62 billion.

Rebuilding, once under way, should help energize overall economic activity and the jobs climate, though probably not until next year. All the billions of dollars expected to be pumped into the economy, however, are raising heightened fears about inflation, analysts said.

"Clearly the Fed's main eye is on inflation," said Stuart Hoffman, chief economist at PNC Financial Services Group. "They are more worried about inflation because they view the setback to economic growth as temporary."

The Fed said it would maintain a course of "measured" rate increases in the months ahead. Economists have come to view that as quarter-point bumps.

Analysts had mixed opinions, though, on whether the Fed will raise rates at both of its next two scheduled meetings this year — on Nov. 1 and Dec. 13. Many believe that the Fed's key short-term rate, now at 3.75 percent, will be rising. Some think it could climb to 4.25 percent or 4.50 percent by spring.