November 17, 1998
October 15, 1998
Statement·Presser·Minutes
AGAlan GreenspanNovember 17, 1998 FOMC Statement
FOMC statement
FOMC statement
FOMC statement: Reduction in the discount rate and expected drop in federal funds rate by equal amount
For immediate release
The Federal Reserve today announced the following set of policy actions:
The Board of Governors approved a reduction in the discount rate by 25 basis points from 5 4-3/4 percent to 4-3/4 4-1/2 percent.
The federal funds rate is expected to fall 25 basis points from around 5-1/4 5 percent to around 5 4-3/4 percent.
Although conditions in financial markets have settled down materially since mid-October, unusual strains remain. With the 75 basis point decline in the federal funds rate since September, financial conditions can reasonably be expected to be consistent with fostering sustained economic expansion while keeping inflationary pressures subdued.
In taking the discount rate action, the Board approved requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, and San Francisco. Dallas. The discount rate is the interest rate that is charged depository institutions when they borrow from their district Federal Reserve Banks.
Growing caution by lenders and unsettled conditions in financial markets more generally are likely to be restraining aggregate demand in the future. Against this backdrop, further easing of the stance of monetary policy was judged to be warranted to sustain economic growth in the context of contained inflation.
Our summary
What changed
- The FOMC cut the discount rate by 25 basis points to 4-1/2 percent and the federal funds rate to around 4-3/4 percent.
- The statement replaced the prior rationale of lender caution and unsettled markets with a note that conditions have settled materially since mid-October, though strains remain.
- It cited the cumulative 75 basis point decline in the federal funds rate since September as consistent with sustained expansion and subdued inflation.
- The list of Federal Reserve Banks whose requests were approved narrowed from eight to three: New York, Philadelphia, and Dallas.
Implications
The shift from warning about restraining demand to acknowledging settled markets suggests the FOMC sees less urgency for further easing, framing the current stance as sufficient. The reference to cumulative easing may signal a pause, with future moves dependent on whether strains persist or inflation pressures emerge.
Summary generated automatically from the statements. Not investment advice.