May 3, 2005
March 22, 2005
Statement·Presser·Minutes
AGAlan GreenspanMay 3, 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 2-3/4 3 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 evidently continues to grow at a Recent data suggest that the solid pace despite of spending growth has slowed somewhat, partly in response to the rise earlier increases in energy prices, and labor prices. Labor market conditions conditions, however, apparently continue to improve gradually. Though longer-term inflation expectations remain well contained, pressures 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. Longer-term inflation expectations remain well contained.
The Committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal. With underlying inflation expected to be 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.; Richard W. Fisher; 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 3-3/4 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 3 percent.
- Noted that the solid pace of spending growth has slowed somewhat, partly due to earlier energy price increases.
- Removed language stating energy prices had not notably fed through to core consumer prices.
- Approved a 25-basis-point increase in the discount rate to 4 percent.
- Expanded the list of Federal Reserve Banks approving the discount rate increase to include Kansas City and Dallas.
Implications
The FOMC acknowledged a slowdown in spending growth but maintained that labor markets and inflation pressures continue to evolve as before, suggesting a measured pace of policy tightening remains appropriate. The removal of the core inflation caveat may signal slightly greater concern about inflation pass-through, though longer-term expectations are still seen as contained.
Summary generated automatically from the statements. Not investment advice.