Forecasting Growth,

Fed Raises a Key Rate

Federal Reserve officials expressed confidence that the economy will regain momentum and raised a key short-term interest rate to ensure that inflation remains under control.

The Fed blamed high energy prices for the recent sharp slowdowns in economic growth and job gains. They made it clear that they view that "softness" as temporary and that they will probably continue to lift rates gradually as expansion continues.

The action appeared to dismiss concerns that the economic recovery is faltering again, just months before a presidential election that could hinge on economic perceptions.

The economy "appears poised to resume a stronger pace of expansion going forward," the Federal Open Market Committee said in its statement.

Some analysts argue that the recent economic slowdown simply reveals weaknesses masked in recent years by tax cuts and the Fed's own interest rate policies. Continuing to raise rates in such an environment, they contend, risks undermining the recovery.

Fed officials agreed unanimously to nudge their federal funds rate -- the interest rate charged between banks on overnight loans -- to 1.50 percent from 1.25 percent.

Banks responded by raising their prime lending rate for business loans to 4.50 percent from 4.25 percent. That means consumer rates that are tied to the prime rate, such as many home-equity loans and credit cards, will probably rise by as much. But rates are still low by historical standards.

-- Nell Henderson

NASA to Use Robot

To Make Repairs to Hubble

NASA has decided to move ahead with an ambitious mission to service the Hubble Space Telescope using a robotic repairman to change batteries and gyroscopes, add new instruments, and maybe fix a malfunctioning spectrograph, agency officials said.

The decision marked a sharp turnabout for NASA and Administrator Sean O'Keefe , the target of withering criticism since a January announcement that NASA would no longer service Hubble and would develop a robot whose only purpose would be to steer the telescope out of orbit and safely into a watery grave.

Al Diaz, associate administrator for NASA's Science Mission Directorate, described the next nine months as "a design and testing phase" during which engineers will work out details of the mission to prove that a robotic servicing mission can be done. Then will come a "critical design review," in which the agency will decide whether to commit the money to finish the job. A successful mission would extend the life of the 15-year-old telescope by at least five years, Diaz said.

NASA officials said O'Keefe told the Hubble team that the mission would come in 2007.

Hubble, in orbit 360 miles above Earth, is one of the most successful NASA projects ever undertaken. With periodic space shuttle visits for overhauls and instrument updates, the telescope has produced generations of spectacular images.

-- Guy Gugliotta

California Supreme Court

Nullifies Gay Marriages

California's Supreme Court nullified the nearly 4,000 same-sex marriages that San Francisco sanctioned this spring, ruling that the city did not have the authority to take such action in defiance of state law.

In a unanimous opinion, the justices said that allowing public officials to flout state statutes that they consider legally dubious would create a dangerous precedent. The court then voted 5 to 2 to invalidate the marriages.

The court's rulings focused only on the narrow question of whether San Francisco Mayor Gavin Newsom had the right to legalize same-sex marriage -- not the larger issue of whether the ban on such unions is constitutional. That question has not yet reached the state's highest court but is making its way through California's judicial system. It could be resolved next year.

Newsom's decision to permit same-sex marriages drew gay couples from around the world and created a month-long carnival of civil disobedience inside San Francisco's City Hall, where vows were exchanged. It also inspired other municipalities to take similar steps and intensified a national debate.

-- Rene Sanchez

Rumsfeld Applauds

Afghan Voter Registration

Defense Secretary Donald H. Rumsfeld, making a brief unannounced visit to Afghanistan, said he believes the country is "on the path to having successful, free and fair elections" in October and pledged continued U.S. and international support for that effort.

Rumsfeld described as "regrettable" the wave of pre-election attacks by Islamic militant groups that have left a dozen voter registration workers dead. He emphasized the successful and unexpectedly high level of voter registration, which recently passed the 9 million mark in a country with an estimated 9.5 million eligible voters.

But the top Pentagon official suggested in a joint appearance with President Hamid Karzai that drug trafficking could present a far more serious threat to political stability and freedom in Afghanistan, the world's largest producer of opium poppies.

-- Pamela Constable

Judge Finds Reporter

In Contempt in CIA Case

A federal judge held a Time reporter in contempt of court for refusing to testify in an investigation of the leak of a CIA officer's identity, after refusing to quash federal grand jury subpoenas seeking information from the media.

Chief U.S. District Judge Thomas F. Hogan ruled that the First Amendment does not insulate reporters from the magazine and NBC News from a requirement to testify before a grand jury investigating possible illegal disclosure of classified information. He unsealed an order that demands the "confinement" of Time reporter Matthew Cooper, who has refused to testify in the probe, but stayed it pending appeal.

The judge's opinion will be immediately appealed, Time executives said.

Although NBC fought a subpoena issued May 21 and was included in the opinion, it avoided a contempt citation after Tim Russert, moderator of NBC's "Meet the Press," agreed to an interview in which he answered a limited number of questions posed by special prosecutor Patrick J. Fitzgerald, NBC said in a statement.

Lawyers said it appears Fitzgerald is now armed with a strong and unambiguous court ruling to demand the testimony of two journalists -- syndicated columnist Robert D. Novak, who first disclosed the name and identity of the CIA officer, Victoria Plame, and Washington Post reporter Walter Pincus, who has written that a Post reporter received information about her from an administration official.

-- Susan Schmidt and Carol Leonnig