Washington ? The Federal Reserve pushed borrowing costs to their highest point in nearly four years Tuesday in an attempt to make sure the combination of high energy prices and a solidly growing economy doesn’t turn into a recipe for inflation.

Chairman Alan Greenspan and his colleagues lifted a key short-term rate, called the federal funds rate, by one-quarter percentage point to 3.50 percent. It marked the 10th increase of that size in the Fed’s 14-month campaign to tighten credit.

In response, commercial banks began boosting their prime lending rates – used for many short-term consumer loans, including variable-rate credit cards and popular home equity lines of credit- by a corresponding amount to 6.50 percent.

The increases left both the funds rate and the prime lending rates at their highest levels in nearly four years.

Fed policy-makers, in a brief statement accompanying their rate decision, had mostly good things to say about the economy.

They said that despite high energy prices, consumers and businesses are spending – important forces behind economic activity. And they noted that the job climate continues to improve.

But policy-makers made clear once again that fighting inflation – which currently doesn’t appear to be a danger to the economy – remains a top mission. “Pressures on inflation have stayed elevated,” they said. The Fed’s previous statement, on June 30, used the same language.

Against that backdrop, the Fed stuck to its course of gradually raising rates to fend off inflation. It said future rate increases would be at “at a pace that is likely to be measured.” Analysts view that phrase as meaning additional quarter-point increases at the Fed’s next meeting, Sept. 20, as well as the year’s last two meetings in November and December.

If that turns out to be the case, the funds rate – the interest banks charge each other on overnight loans – would climb to 4.25 percent by the end of this year. That would push the prime rate to 7.25 percent.

“The Fed is very comfortable with its strategy of slowly pushing rates higher,” said Lynn Reaser, chief economist at Banc of America Capital Management. “It, however, believes we still have a ways to go before rates get to a level that will keep the economy growing but also hold inflation in check.”

Reaser and some other economists believe the Fed may continue its steady rate raising into 2006.

“There was no hint of a pause, and no hint of a more aggressive tightening stance,” said Sherry Cooper, chief economist at BMO Nesbitt Burns.

On Wall Street, stocks rose. The Dow Jones industrials gained 78.74 points to close at 10,615.67.

A rapid pickup in inflation – if not blunted by other economic forces – can erode workers’ paychecks and drive up business costs. If inflation is bad enough, it can short circuit economic growth. The Fed is being especially watchful for any sign that the strengthening labor market is fanning inflation, economists said.

The Fed’s action comes after a series of largely positive economic readings.

Employers cranked up hiring in July, adding 207,000 jobs. That was up from 166,000 jobs in June.

The economy as a whole expanded at a chipper 3.4 percent pace in the second quarter – even in the face of expensive energy. Economic growth is expected to top a 4 percent pace in the July-to-September period.

Still, energy prices continue marching higher. Oil prices set a new record Monday, closing at a high of $63.94 a barrel. Gasoline prices last week averaged $2.37 a gallon nationwide, a new high.

“Aggregate spending, despite high energy prices, appears to have strengthened since late winter and labor market conditions continue to improve gradually,” the Fed said.

Before the Fed embarked on its rate-raising campaign, the prime rate stood at 4 percent, the lowest since 1958; the funds rate was at 1 percent, a 46-year low.

Rates had sunk to those low levels after an aggressive series of rate cuts to help the economy recover from the 2001 recession and the jolt of the terror attacks on Sept. 11, 2001, and a wave of corporate accounting scandals that rocked Wall Street.