December 10, 2002 FOMC Statement

Target rate 1.25% unchanged Vote 12–0 Tone: Leaning dovish -0.54

FOMC statement

FOMC statement ~~FOMC statement and Board discount rate action~~

For immediate release

The Federal Open Market Committee decided today to keep its target for the federal funds rate unchanged at 1-1/4 percent.

The Committee continues to believe that this accommodative stance of monetary policy, coupled with still robust underlying growth in productivity, is providing important ongoing support to economic activity. The limited number of incoming economic indicators since the November meeting, taken together, are not inconsistent with the economy working its way through its current soft spot.

In these circumstances, the Committee believes ~~that today's additional monetary easing should prove helpful as the economy works its way through this current soft spot. With this action, the Committee believes~~ 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 balanced with respect to the prospects for both goals in for the foreseeable future.

Voting for the FOMC monetary policy action were Alan Greenspan, Chairman; William J. McDonough, Vice Chairman; Ben S. Bernanke, Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Jerry L. Jordan; Donald L. Kohn, Robert D. McTeer, Jr.; Mark W. Olson; Anthony M. Santomero, and Gary H. Stern.

The Federal Open Market Committee decided today to lower its target for the federal funds rate by 50 basis points to 1 1/4 percent. In a related action, the Board of Governors approved a 50 basis point reduction in the discount rate to 3/4 percent.

The Committee continues to believe that an accommodative stance of monetary policy, coupled with still-robust underlying growth in productivity, is providing important ongoing support to economic activity. However, incoming economic data have tended to confirm that greater uncertainty, in part attributable to heightened geopolitical risks, is currently inhibiting spending, production, and employment. Inflation and inflation expectations remain well contained.

~~In taking the discount rate action, the Federal Reserve Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Dallas and New York.~~

Source

Our summary

What changed

The FOMC kept the federal funds rate target unchanged at 1-1/4 percent, after lowering it by 50 basis points in November.
No discount rate action was taken; the previous statement's 50 basis point reduction and related Board approvals were removed.
The statement dropped language about heightened geopolitical risks inhibiting spending, production, and employment, and removed the note that inflation and inflation expectations remain well contained.
The FOMC now says the limited incoming data are not inconsistent with the economy working through its soft spot, replacing the prior emphasis on uncertainty.
The risk assessment remains balanced, and the vote was unanimous with the same list of voters as in November.

Implications

The removal of geopolitical risk language and the softer economic assessment suggest the FOMC sees less urgency for further easing, though it maintains a balanced risk view.

Markets may interpret the unchanged rate and steady language as a pause, with future moves dependent on incoming data rather than immediate concerns.

Summary generated automatically from the statements. Not investment advice.