March 28, 2006
January 31, 2006
Statement·Presser·Minutes
BBBen S. BernankeMarch 28, 2006 FOMC Statement
FOMC statement
FOMC statement
For immediate release
The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 4-1/2 4-3/4 percent.
The slowing of the growth of real GDP in the fourth quarter of 2005 seems largely to have reflected temporary or special factors. Economic growth has rebounded strongly in the current quarter but appears likely to moderate to a more sustainable pace. As yet, the run-up in the prices of energy and other commodities appears to have had only a modest effect on core inflation, ongoing productivity gains have helped to hold the growth of unit labor costs in check, and inflation expectations remain contained. Still, possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures.
The Committee judges that some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance. In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives.
Voting for the FOMC monetary policy action were: Alan Greenspan, Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Roger W. Ferguson, Jr.; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Jeffrey M. Lacker; Mark W. Olson; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen.
In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 5-1/2 5-3/4 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, Kansas City, Minneapolis, Dallas, and San Francisco.
Although recent economic data have been uneven, the expansion in economic activity appears solid. Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained. Nevertheless, possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures.
Our summary
What changed
- Raised the federal funds rate target by 25 basis points to 4-3/4 percent, up from 4-1/2 percent.
- Replaced the prior economic assessment with language noting the fourth-quarter GDP slowdown was likely temporary, with growth rebounding strongly but set to moderate.
- Expanded the inflation risk discussion to include elevated prices of energy and other commodities, while noting modest effects on core inflation and contained expectations.
- Approved a 25-basis-point increase in the discount rate to 5-3/4 percent, and the list of Federal Reserve Banks approving the action now includes Minneapolis instead of Kansas City.
- The voting roster changed: Ben S. Bernanke replaced Alan Greenspan as Chairman, and Randall S. Kroszner and Kevin M. Warsh replaced Roger W. Ferguson, Jr.
Implications
The updated outlook suggests the FOMC sees the recent slowdown as transitory and expects growth to settle at a sustainable pace, while still flagging inflation risks from resource use and commodity prices.
The continued rate hike and unchanged forward guidance indicate a gradual tightening path remains likely, with the FOMC ready to adjust based on incoming data.
Summary generated automatically from the statements. Not investment advice.