October 28, 2003 FOMC Statement

Target rate 1.00% unchanged Vote 12–0 Tone: Clearly dovish -0.94

FOMC statement

For immediate release

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

The Committee continues to believe that an accommodative stance of monetary policy, coupled with robust underlying growth in productivity, is providing important ongoing support to economic activity. The evidence accumulated over the intermeeting period confirms that spending is firming, ~~although~~ and the labor market ~~has been weakening.~~ appears to be stabilizing. Business pricing power and increases in core consumer prices remain muted.

The Committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. In contrast, the probability, though minor, of an unwelcome fall in inflation exceeds that of a rise in inflation from its already low level. The Committee judges that, on balance, the risk of inflation becoming undesirably low remains the predominant concern for the foreseeable future. In these circumstances, the Committee believes that policy accommodation can be maintained for a considerable period.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Ben S. 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; Robert T. Parry; and Jamie B. Stewart, Jr.

Source

Our summary

What changed

The FOMC updated its labor market assessment, noting that the labor market appears to be stabilizing, whereas the previous statement said it had been weakening.
The federal funds rate target remains at 1 percent, with no change in the policy stance.
The statement retains the language about risks to growth being roughly equal and the predominant concern about inflation being undesirably low.
The vote was unanimous, with the same 12 members voting for the action as in the previous statement.

Implications

The shift from 'weakening' to 'stabilizing' suggests the FOMC sees early signs of improvement in the labor market, which could reduce the urgency for further easing.

The unchanged language on inflation and policy accommodation indicates that the FOMC is not yet ready to signal a tightening, and markets may interpret this as a continued commitment to low rates for a considerable period.

Summary generated automatically from the statements. Not investment advice.