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July 12, 2005 10:00 AM, EDT

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conomists raised their U.S. economic growth forecasts for this year's second half and said they expect the Federal Reserve to lift its interest rate target more as a result, Bloomberg reported Tuesday.

A Bloomberg monthly survey News monthly survey showed t U.S. economy will grow at a 3.5% annual rate this quarter and 3.4% in the year's final three months. Each figure is a 0.1% higher than economists predicted a month ago.

The Federal Reserve’s rate target now may reach 4% by year-end, a quarter-point higher than in the previous survey.

Rising home prices and an improved job market are giving consumers willingness to keep spending even as gasoline costs surge to a record, economists said.

Auto sales rebounded in June and same-store sales at retailers rose more than expected, industry reports last week showed, Bloomberg reported.