August 16, 1994
May 17, 1994
Statement·Presser·Minutes
AGAlan GreenspanAugust 16, 1994 FOMC Statement
FOMC statement
FOMC statement
For immediate release
The Federal Reserve announced today the following monetary policy actions:
The Board of Governors approved an increase in the discount rate from 3 1/2 percent to 4 percent, effective immediately.
The Board approved an increase in the discount rate from 3 percent to 3-1/2 percent, effective immediately, and the Federal Open Market Committee agreed that this increase should would be allowed to show through completely into interest rates in reserve markets.
These measures were taken against the background of evidence of continuing strength in the economic expansion and high levels of resource utilization. The actions are intended to keep inflationary pressures contained, and thereby foster sustainable economic growth.
The Federal Reserve will continue to monitor economic and financial developments to gauge the appropriate stance of policy. But these actions are expected to be sufficient, at least for a time, to meet the objective of sustained, noninflationary growth.
In taking the discount rate action, the Board approved requests submitted by the Boards of Directors of eleven the Federal Reserve Banks -- of Boston, New York, Philadelphia, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco. Dallas. The discount rate is the interest rate that is charged depository institutions when they borrow from their district Federal Reserve Bank. Banks.
The Federal Reserve today announced two actions designed to maintain favorable trends in inflation and thereby sustain the economic expansion.
These actions, combined with the three adjustments initiated earlier this year by the FOMC, substantially remove the degree of monetary accommodation which prevailed throughout 1993. As always, the Federal Reserve will continue to monitor economic and financial developments to judge the appropriate stance of monetary policy.
Our summary
What changed
- Raised the discount rate from 3.5% to 4%, effective immediately, and allowed the increase to pass through fully to reserve market rates.
- Cited evidence of continuing economic strength and high resource utilization as the backdrop for the action.
- Stated the actions are intended to contain inflationary pressures and foster sustainable growth, and are expected to be sufficient for a time.
- Approved discount rate requests from five Federal Reserve Banks (Boston, New York, Richmond, Kansas City, Dallas), fewer than the eleven in the prior statement.
- Dropped language about removing monetary accommodation and the three earlier FOMC adjustments, instead framing the move as a standalone measure.
Implications
The shift from emphasizing cumulative tightening to declaring the current action sufficient suggests the FOMC sees less need for immediate further moves, though it retains flexibility to adjust if data warrant.
Markets may interpret the reduced list of requesting banks and the more confident language as signaling a pause in the tightening cycle, while the focus on resource utilization hints at vigilance against inflation.
Summary generated automatically from the statements. Not investment advice.