September 21, 2004 FOMC Statement

FOMC statement

FOMC statement and Board discount rate action

For immediate release

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 1-1/2 1-3/4 percent.

The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. In recent months, output growth has moderated and the pace of improvement After moderating earlier this year partly in labor market conditions has slowed. This softness likely owes importantly response to the substantial rise in energy prices. The economy nevertheless prices, output growth appears poised to resume a stronger pace of expansion going forward. Inflation has been somewhat elevated this year, though a portion of have regained some traction, and labor market conditions have improved modestly. Despite the rise in prices seems to reflect transitory factors. energy prices, inflation and inflation expectations have eased in recent months.

The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters are to be roughly equal. With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Thomas M. Hoenig; Donald L. Kohn; Cathy E. Minehan; Mark W. Olson; Sandra Pianalto; and William Poole.

In a related action, the Board of Governors unanimously approved a 25 basis point increase in the discount rate to 2-1/2 2-3/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.

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