Investors hoping the Federal Reserve would take a break from raising interest rates in Hurricane Katrina's aftermath got a cold dose of reality yesterday when policymakers not only nudged up short-term rates but signaled more increases are on the way.

The Fed's latest move, which raised its bellwether federal funds rate to 3.75 percent, the 11th quarter-point increase in 15 months, underscored the central bank's determination to curb inflationary forces in the face of soaring energy prices and its conviction that Katrina's economic impact will be short-lived.

While acknowledging that Katrina will likely set back the economy "in the near term,'' the Fed's policy-making Open Market Committee, in explaining its decision to raise rates again, said the storm's effects on spending, production and employment "do not pose a more persistent threat."

But the committee did find that "higher energy and other costs have the potential to add to inflation pressures" and said the accommodative monetary policy that had driven rates to historic lows "can be removed at a pace that is likely to be measured." In the past, such language has signaled further Fed increases.

"It was a hawkish statement," said Mark Zandi, chief economist at Economy.com, the suburban Philadelphia economic consulting and research firm. "It indicated there has to be a reason for them not to tighten in November."

Although most economists had concluded in recent days that the Fed was likely to raise rates, that sentiment was not so widely shared in the first weeks after Katrina, when many had speculated that the central bank would back off another increase.

That thinking arose because hurricane Katrina significantly changed economic forecasts for the remainder of the year. The Congressional Budget Office estimated that the hurricane, which shuttered Gulf Coast businesses and cut into oil production, could lop a full percentage point from the gross domestic product for the final half of 2005.

At the same time, most economic forecasts also suggested that the rebuilding of coastal communities hard-hit by Katrina could reignite the economy beginning early next year.

As late as yesterday, some economists still thought that a pause might come in November, depending on how much of a hit the economy actually sustains in the final quarter of 2005.

"The economic data is going to look very bad," Zandi said, noting that he expects September data to show declines in jobs, industrial production and income.

Some analysts applauded the Fed for staying the course in the face of sentiment against a rate increase in Congress, among investors and among some business interests.

"A Fed pause, or even a rate cut, would have done nothing to help the Gulf Coast area," said Richard Yamarone, director of economic research for Argus Research Inc., a New York investment research firm.

"In fact, pausing would have fanned the inflationary fire that seems to be burning brighter and brighter with each economic report." In the weeks since Katrina, oil and gasoline prices have hit new records and prices for natural gas, building supplies and other commodities have jumped.

Other economic observers thought a pause in the Fed's rate march was warranted. Among other reasons, higher rates will "raise the cost of rebuilding" communities devastated by Katrina, said Peter Morici, a professor at the University of Maryland's Robert H. Smith School of Business.

When push came to shove, the Fed weighed the evidence and felt inflationary pressures trumped concerns about growth, said Marvin Goodfriend, an economics professor at Carnegie Mellon University's Tepper School of Business who until recently served as senior vice president and policy adviser to the president of the Federal Reserve Bank in Richmond, Va.

The Fed's action "tells us that the circumstances produced by Katrina have inflationary consequences as well as growth consequences." And policymakers, in reviewing both sets of somewhat contradictory consequences, saw no reason to alter the direction in which it began moving some 15 months ago, he said.

Wall Street apparently was looking for a pause. The Dow Jones industrial average, which had been trading up on the day, quickly turned negative after the Fed's mid-afternoon announcement and ended the day at 10,481.52, off 76.11.

In addition to investors, who worry about higher rates cutting into business prospects and profits, borrowers no doubt also felt some jitters over the latest rate hike.

The increase in the Fed funds rate, the target rate on overnight loans banks charge each other, usually translates quickly into increases in the prime rates charged by banks, which often are used as the benchmark for making changes in adjustable rate mortgages, credit cards and other consumer debt.

As if on cue, local banks Mellon Financial, PNC Financial Services Group and Dollar Bank all raised their prime rates a quarter-point late yesterday, to 6.75 percent.