BY  Beth Belton; Bill Montague

        The Federal Reserve increased short-term interest rates a half percentage point Tuesday to their highest levels since November 1991.
        That decision in turn prompted most commercial banks to raise their prime lending rates - to which most consumer loans are pegged.
        Chase Manhattan Bank and Norwest Corp. increased their prime from 7.25% to 7.75% - highest in three years.
        Stock and bond prices also soared in reaction; the Dow Jones industrial average jumped 24.28 points to 3784.57.
        The Fed said it would raise the discount rate, what it charges banks for overnight loans, to 4% from 3.5%.
        It also set a new target of 4.75%, up from 4.25%, for the federal funds rate - what banks charge each other for overnight loans.
        "The actions are intended to keep inflationary pressures contained, and thereby foster sustainable economic growth," a Fed statement said.
        "A big thumbs up," says David Jones, economist at Aubrey Lanston & Co. in New York.
        Savers will earn more on short-term investments. But borrowers will suffer since higher rates means their interest payments will rise.
        Bond investors were ecstatic at the Fed's inflation-fighting move. Inflation erodes the value of bonds' fixed payments.
        The yield on the 30-year Treasury bond, which moves opposite to its price, fell to 7.36% from 7.5% Monday.
        To check inflation, the Fed has pushed rates 1.75 percentage points higher in five moves this year. The last was May 17.