April 29–30 · Published May 21, 2008
Statement·Presser·Minutes
BBBen S. BernankeApril 29–30, 2008 FOMC Minutes
Our reading
The minutes are consistent with the statement because both documents reflect the FOMC's decision to lower the federal funds rate by 25 basis points to 2 percent, acknowledge the weak economic activity, subdued spending, softened labor markets, financial market stress, and the mixed inflation outlook with improved core readings but rising energy and commodity prices, while also emphasizing the need to monitor inflation and the expectation that inflation will moderate.
Our reading compares the minutes of the April 29–30 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 they preferred no change in the target federal funds rate at this meeting. Although the economy had been weak, it had evolved roughly as expected since the previous meeting. Stresses in financial markets also had continued, but the Federal Reserve's liquidity facilities were helpful in that regard and the more worrisome development in their view was the outlook for inflation. Rising prices for food, energy, and other commodities; signs of higher inflation expectations; and a negative real federal funds rate raised substantial concerns about the prospects for inflation. Mr. Fisher was concerned that an adverse feedback loop was developing by which lowering the funds rate had been pushing down the exchange value of the dollar, contributing to higher commodity and import prices, cutting real spending by businesses and households, and therefore ultimately impairing economic activity. To help prevent inflation expectations from becoming unhinged, both Messrs. Fisher and Plosser felt the Committee should put additional emphasis on its price stability goal at this point, and they believed that another reduction in the funds rate at this meeting could prove costly over the longer run.
- Timothy F. Geithner
- Donald L. Kohn
- Randall S. Kroszner
- Frederic S. Mishkin
- Sandra Pianalto
- Charles I. Plosser ↑ dissented
- Because they preferred no change in the target federal funds rate at this meeting. Although the economy had been weak, it had evolved roughly as expected since the previous meeting. Stresses in financial markets also had continued, but the Federal Reserve's liquidity facilities were helpful in that regard and the more worrisome development in their view was the outlook for inflation. Rising prices for food, energy, and other commodities; signs of higher inflation expectations; and a negative real federal funds rate raised substantial concerns about the prospects for inflation. Mr. Plosser cited the recent rapid growth of monetary aggregates as additional evidence that the economy had ample liquidity after the aggressive easing of policy to date. To help prevent inflation expectations from becoming unhinged, both Messrs. Fisher and Plosser felt the Committee should put additional emphasis on its price stability goal at this point, and they believed that another reduction in the funds rate at this meeting could prove costly over the longer run.
- Stern
- Kevin Warsh
From the minutes
FOMC minutes
By notation vote completed on April 7, 2008, the Committee unanimously approved the minutes of the FOMC meeting held on March 18, 2008.
_____________________________
Brian F. Madigan
Secretary
What changed from the previous meeting’s minutes
- The federal funds rate target was lowered by 75 basis points to 2-1/4 percent in March, then by 25 basis points to 2 percent in April.
- The April minutes noted financial market conditions had improved since March, with lower volatility and credit risk premiums.
- The April statement removed language emphasizing downside risks to growth, citing more balanced risks.
- The April minutes projected GDP growth at or above trend in 2010, a new addition to the outlook.
- The April minutes reported core inflation readings had improved somewhat, though partly due to transitory factors.
- The April minutes noted the likelihood of severe financial system deterioration had receded since March.
Summary generated automatically from the two documents.