The FMOC added to last week's surprise 75 basis point cut with an extra 50 basis point cut decision in their normally scheduled meeting today. The target for the federal funds rate currently sits at 3.00%. The Fed also slashed the discount rate by a half-point to 3.50%. They also eased the monetary policy by 1 1/4 points in just over a week to keep a recession at bay or for sure shorten it. The policy statement resembled last week's 75 basis point rate cut. In it they noted market stress and tighter credit conditions. They also showed and increasing slowdown in the housing market which could be affecting softer labor market conditions. They will continue to watch inflation but expect it to be moderate this year. The policy makers hope that the actions taken will help generate growth over time, but will remain watchful should action be needed again.
Federal Open Market Committee Policy Statement
For immediate release
The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 3 percent.
Financial markets remain under considerable stress, and credit has tightened further for some businesses and households. Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets.
The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.
Today’s policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred no change in the target for the federal funds rate at this meeting.
In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 3-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, Kansas City, and San Francisco.
