March 18, 2003 FOMC Statement

Target rate 1.25% unchanged Vote 12–0 Tone: Leaning dovish -0.62

FOMC statement

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.

~~Oil~~ While incoming economic data since the January meeting have been mixed, recent labor market indicators have proven disappointing. However, the hesitancy of the economic expansion appears to owe importantly to oil price premiums and other aspects of geopolitical ~~risks have reportedly fostered continued restraint on spending and hiring by businesses. However, the~~ uncertainties. The Committee believes that as those ~~risks~~ uncertainties lift, as most analysts expect, the accommodative stance of monetary policy, coupled with ongoing growth in productivity, will provide support to economic activity sufficient to engender an improving economic climate over time.

In light of the unusually large uncertainties clouding the geopolitical situation in the short run and their apparent effects on economic decisionmaking, the Committee does not believe it can usefully characterize the current balance of risks with respect to the prospects for its long-run goals of price stability and sustainable economic growth. Rather, the Committee decided to refrain from making that determination until some of those uncertainties abate. In the current circumstances, heightened surveillance is particularly informative.

Voting for the FOMC monetary policy action were Alan Greenspan, Chairman; William J. McDonough, Vice Chairman; Ben S. ~~Bernanke,~~ Bernanke; Susan S. Bies; J. Alfred Broaddus, Jr.; Roger W. Ferguson, Jr.; Edward M. Gramlich; Jack Guynn; Donald L. Kohn; Michael H. Moskow; Mark W. ~~Olson,~~ Olson; and Robert T. Parry.

In these circumstances, 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 for the foreseeable future.

Source

Our summary

What changed

The FOMC kept the federal funds rate target unchanged at 1-1/4 percent.
It noted that incoming economic data have been mixed and recent labor market indicators have been disappointing.
It attributed the hesitancy of the expansion to oil price premiums and geopolitical uncertainties, rather than just reporting restraint on spending and hiring.
The FOMC dropped its balanced-risks characterization, saying it cannot usefully assess the balance of risks due to unusually large geopolitical uncertainties, and will refrain from that determination until they abate.
The vote was unanimous, with the same 12 members voting for the action.

Implications

The shift from a balanced-risk assessment to no risk characterization signals heightened uncertainty about the near-term outlook, suggesting the FOMC is holding policy steady while awaiting clarity on geopolitical developments.

Markets may read the omission of a risk balance as a more cautious stance, with the FOMC emphasizing heightened surveillance rather than signaling any near-term policy bias.

Summary generated automatically from the statements. Not investment advice.