June 29, 2006 FOMC Statement

FOMC statement

FOMC statement FOMC statement and Board approval of discount rate requests of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Dallas, and San Francisco

For immediate release

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 5 5-1/4 percent.

Economic Recent indicators suggest that economic growth has been is moderating from its quite strong so far pace earlier this year. The Committee sees growth as likely to moderate to a more sustainable pace, year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.

As yet, the run-up in the prices of energy and other commodities appears to have had only a modest effect Readings on core inflation, ongoing inflation have been elevated in recent months. Ongoing productivity gains have helped to hold held down the growth of rise in unit labor costs in check, costs, and inflation expectations remain contained. Still, possible increases in However, the high levels of resource utilization, in combination with utilization and of the elevated prices of energy and other commodities, commodities have the potential to add to sustain inflation pressures.

The Although the moderation in the growth of aggregate demand should help to limit inflation pressures over time, the Committee judges that some further policy firming may yet be needed to address inflation risks but emphasizes that the remain. The extent and timing of any such additional firming that may be needed to address these risks will depend importantly on the evolution of the economic outlook for both inflation and economic growth, as implied by incoming information. In any event, the Committee will respond to changes in economic prospects as needed to support the attainment of its objectives.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; 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 6 6-1/4 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, Dallas, and San Francisco. Dallas.

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