August 9, 2005
June 30, 2005
Statement·Presser·Minutes
AGAlan GreenspanAugust 9, 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 3-1/4 3-1/2 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. Although Aggregate spending, despite high energy prices prices, appears to have risen further, the expansion remains firm strengthened since late winter, and labor market conditions continue to improve gradually. Pressures on Core inflation have stayed elevated, but has been relatively low in recent months and longer-term inflation expectations remain well contained. contained, but pressures on inflation have stayed elevated.
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; Susan S. Bies; Roger W. Ferguson, Jr.; Richard W. Fisher; Edward M. Gramlich; 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 4-1/4 4-1/2 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 3-1/2 percent.
- Noted that aggregate spending appears to have strengthened since late winter despite high energy prices.
- Observed that core inflation has been relatively low in recent months, while pressures on inflation remain elevated.
- Increased the discount rate by 25 basis points to 4-1/2 percent.
Implications
The upgraded assessment of spending suggests the FOMC sees the economy as more resilient, supporting continued gradual rate increases.
The emphasis on low core inflation may signal that the FOMC is not overly concerned about near-term price pressures, but the persistence of elevated inflation pressures keeps the door open for further tightening.
Summary generated automatically from the statements. Not investment advice.