March 22, 2005
February 2, 2005
Statement·Presser·Minutes
AGAlan GreenspanMarch 22, 2005 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 2-1/2 2-3/4 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. Output appears evidently continues to be growing grow at a moderate solid pace despite the rise in energy prices, and labor market conditions continue to improve gradually. Inflation and Though longer-term inflation expectations remain well contained. contained, pressures on inflation have picked up in recent months and pricing power is more evident. The rise in energy prices, however, has not notably fed through to core consumer prices.
The Committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters to should be kept roughly equal. With underlying inflation expected to be relatively low, contained, 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; Jack Guynn; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Anthony M. Santomero; and Gary H. Stern.
In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 3-1/2 3-3/4 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.
Our summary
What changed
- Raised the federal funds rate target by 25 basis points to 2-3/4 percent, and the discount rate to 3-3/4 percent.
- Upgraded the description of output growth from 'moderate' to 'solid'.
- Noted that inflation pressures have picked up and pricing power is more evident, though energy prices have not fed through to core consumer prices.
- Changed the risk assessment to state that with appropriate policy action, risks should be kept roughly equal, rather than being perceived as roughly equal.
- The list of Federal Reserve Banks approving the discount rate increase no longer includes Dallas and Kansas City.
Implications
The upgraded growth assessment and inflation language suggest the FOMC sees less need for accommodation, but the measured pace language remains, indicating a gradual tightening path.
The shift to 'should be kept roughly equal' implies the FOMC is more confident that policy can manage risks, possibly signaling a continued series of rate hikes.
Summary generated automatically from the statements. Not investment advice.