October 25, 2006 FOMC Statement

Target rate 5.25% unchanged Vote 10–1 · Dissents: Lacker ↑ Tone: Balanced +0.21

FOMC statement

For immediate release

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.

Economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market. Going forward, the economy seems likely to expand at a moderate pace.

Readings on core inflation have been elevated, and the high ~~levels~~ level of resource utilization ~~and of~~ has the ~~prices of energy and other commodities have the~~ potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.

Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

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; Frederic S. Mishkin; Sandra Pianalto; William Poole; Kevin M. Warsh; and Janet L. Yellen. Voting against was Jeffrey M. Lacker, who preferred an increase of 25 basis points in the federal funds rate target at this meeting.

~~The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market.~~

Source

Our summary

What changed

The FOMC kept the federal funds rate target at 5-1/4 percent, unchanged from the previous meeting.
Economic growth language shifted from 'moderation appears to be continuing' to 'has slowed over the course of the year,' with a new forward-looking phrase that the economy 'seems likely to expand at a moderate pace.'
Inflation language dropped the reference to 'prices of energy and other commodities' as potential sustainers of inflation pressures, now citing only the 'high level of resource utilization.'
The voting roster changed: William Poole replaced Jack Guynn as a voting member, while the dissenting vote by Jeffrey M. Lacker remained the same.

Implications

The revised growth assessment suggests the FOMC sees the slowdown as more established, but the added moderate-expansion outlook signals no imminent policy shift.

Removing commodity prices from the inflation-risk list may indicate less concern about external cost pressures, though the persistent 'some inflation risks' language keeps a tightening bias.

The unchanged dissent and steady rate imply the FOMC remains on hold, with future moves dependent on incoming data.

Summary generated automatically from the statements. Not investment advice.