March 18 · Published April 8, 2008
Statement·Presser·Minutes
BBBen S. BernankeMarch 18, 2008 FOMC Minutes
Our reading
The minutes read consistent with the statement because both documents describe the same decision to lower the federal funds rate by 75 basis points to 2-1/4 percent, and they align on the rationale: weakened economic activity, stressed financial markets, elevated inflation with rising expectations, and the expectation that inflation would moderate while downside risks to growth remain.
Our reading compares the minutes of the March 18 FOMC meeting with the FOMC statement issued at the end of that meeting, three weeks before the minutes were published.
Vote
- Ben S. Bernanke
- Richard W. Fisher ↑ dissented
- Because, in light of heightened inflation risks, they favored easing policy less aggressively. Incoming data suggested a weaker near-term outlook for economic growth, but the Committee's earlier policy moves had already reduced the target federal funds rate by 225 basis points to address risks to growth, and the full effect of those rate cuts had yet to be felt. While financial markets remained under stress, the Federal Reserve had already taken separate, significant actions to address liquidity issues in markets. In fact, Mr. Fisher felt that focusing on measures targeted at relieving liquidity strains would improve economic prospects more quickly and lastingly than would further reductions in the federal funds rate at this point; he believed that alleviating these strains would increase the efficacy of the earlier rate cuts. Both Messrs. Fisher and Plosser were concerned that inflation expectations could potentially become unhinged should the Committee continue to lower the funds rate in the current environment. They pointed to measures of inflation and indicators of inflation expectations that had risen, and Mr. Fisher stressed the international influences on U.S. inflation rates.
- Timothy F. Geithner
- Donald L. Kohn
- Randall S. Kroszner
- Frederic S. Mishkin
- Sandra Pianalto
- Charles I. Plosser ↑ dissented
- Because, in light of heightened inflation risks, they favored easing policy less aggressively. Incoming data suggested a weaker near-term outlook for economic growth, but the Committee's earlier policy moves had already reduced the target federal funds rate by 225 basis points to address risks to growth, and the full effect of those rate cuts had yet to be felt. While financial markets remained under stress, the Federal Reserve had already taken separate, significant actions to address liquidity issues in markets. Both Messrs. Fisher and Plosser were concerned that inflation expectations could potentially become unhinged should the Committee continue to lower the funds rate in the current environment. They pointed to measures of inflation and indicators of inflation expectations that had risen. Mr. Plosser noted that the Committee could not afford to wait until there was clear evidence that inflation expectations were no longer anchored, as by then it would be too late to prevent a further increase in inflation pressures.
- Stern
- Kevin Warsh
From the minutes
FOMC minutes
Ms. Yellen voted as alternate member.
_____________________________
Brian F. Madigan
Secretary
What changed from the previous meeting’s minutes
- The federal funds rate target was lowered from 3-1/2 percent to 2-1/4 percent.
- Two dissents (Fisher, Plosser) replaced one dissent (Fisher) from the previous meeting.
- The next meeting was scheduled for April 29-30, 2008, instead of March 18, 2008.
- A Term Securities Lending Facility of up to $200 billion was authorized.
- Swap arrangements with the European Central Bank and Swiss National Bank were expanded and extended to September 30, 2008.
- The minutes noted inflation expectations had risen, a change from the prior emphasis on them remaining well anchored.
Summary generated automatically from the two documents.