September 29, 1998 FOMC Statement

Target rate 5.25% ▼ cut 0.25 pp Vote 11–0 Tone: Clearly dovish -0.91

FOMC statement

For immediate release

The Federal Open Market Committee decided today to ~~tighten money market conditions~~ ease the stance of monetary policy slightly, expecting the federal funds rate to ~~rise 1/4�percentage~~ decline 1/4 percentage point to around ~~5-1/2~~ 5-1/4 percent.

The action was taken to cushion the effects on prospective economic growth in the United States of increasing weakness in foreign economies and of less accommodative financial conditions domestically. The recent changes in the global economy and adjustments in U.S. financial markets mean that a slightly lower federal funds rate should now be consistent with keeping inflation low and sustaining economic growth going forward.

The discount rate remains unchanged at 5 percent.

This action was taken in light of persisting strength in demand, which is progressively increasing the risk of inflationary imbalances developing in the economy that would eventually undermine the long expansion.

In these circumstances, the slight firming of monetary conditions is viewed as a prudent step that affords greater assurance of prolonging the current economic expansion by sustaining the existing low inflation environment through the rest of this year and next. The experience of the last several years has reinforced the conviction that low inflation is essential to realizing the economy's fullest growth potential.

~~No change was made in the Federal Reserve discount rate, which remains at 5 percent.~~

Source

Our summary

What changed

The FOMC reversed course from tightening in March to easing in September, lowering the federal funds rate target by 1/4 percentage point to around 5-1/4 percent.
The rationale shifted from guarding against inflationary imbalances from strong demand to cushioning the U.S. economy against weakness in foreign economies and less accommodative domestic financial conditions.
The March statement discussed sustaining low inflation through this year and next; the September statement instead says a slightly lower rate should be consistent with low inflation and continued growth.
The discount rate remains unchanged at 5 percent in both statements.
The March statement mentioned no other policy changes; the September statement also made no other changes.

Implications

The shift from tightening to easing signals a more defensive posture, prioritizing growth support over preemptive inflation control. Markets would likely read this as a response to external and financial stresses, suggesting future moves could lean toward further accommodation if those conditions persist.

Summary generated automatically from the statements. Not investment advice.