December 11, 2001
November 6, 2001
Statement·Presser·Minutes
AGAlan GreenspanDecember 11, 2001 FOMC Statement
FOMC statement
FOMC statement and Board discount rate action
For immediate release
The Federal Open Market Committee decided today to lower its target for the federal funds rate by 50 25 basis points to 2 1-3/4 percent. In a related action, the Board of Governors approved a 50 25 basis point reduction in the discount rate to 1-1/2 1-1/4 percent.
Heightened uncertainty and concerns about a deterioration Economic activity remains soft, with underlying inflation likely to edge lower from relatively modest levels. To be sure, weakness in business conditions both here and abroad demand shows signs of abating, but those signs are damping economic activity. For the foreseeable future, then, the preliminary and tentative. The Committee continues to believe that, against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness. weakness in the foreseeable future.
Although the necessary reallocation of resources to enhance security may restrain advances in productivity for a time, the long-term prospects for productivity growth and the economy remain favorable and should become evident once the unusual forces restraining demand abate.
In taking the discount rate action, the Federal Reserve Board approved the request requests submitted by the Board Boards of Directors of the Federal Reserve Bank Banks of Richmond. Boston, New York, Philadelphia, Chicago and San Francisco.
Our summary
What changed
- The FOMC lowered the federal funds rate target by 25 basis points to 1-3/4 percent, a smaller cut than the previous 50 basis point reduction.
- The Board of Governors reduced the discount rate by 25 basis points to 1-1/4 percent, matching the smaller size of the funds rate cut.
- Economic language shifted from 'heightened uncertainty and concerns about deterioration' to 'remains soft,' but added that weakness in demand shows preliminary signs of abating.
- The risks language now specifies weakness 'in the foreseeable future,' a slight modification from the previous phrasing without a time horizon.
- The discount rate action was requested by a different set of Federal Reserve Banks, including Boston, New York, Philadelphia, Chicago, and San Francisco, instead of just Richmond.
Implications
The smaller rate cut and tentative acknowledgment of abating demand suggest the FOMC sees the easing cycle as nearing an end, though it retains a bias toward further weakness. Markets may interpret the added phrase about preliminary signs as a cautious signal that more cuts are possible if conditions falter, but the overall tone implies a gradual shift toward assessment rather than aggressive action.
Summary generated automatically from the statements. Not investment advice.