December 12, 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 substantial cooling of the housing market. ~~Going forward,~~ Although recent indicators have been mixed, the economy seems likely to expand at a moderate ~~pace.~~ pace on balance over coming quarters.

Readings on core inflation have been elevated, and the high level of resource utilization has 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; 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.

Source

Our summary

What changed

The FOMC kept the federal funds rate target at 5-1/4 percent, unchanged from the previous meeting.
The description of the housing market was upgraded from 'a cooling' to 'a substantial cooling'.
The outlook for economic growth was slightly tempered, noting that recent indicators have been mixed, but still expecting moderate expansion on balance.
The vote remained 10-1, with Jeffrey M. Lacker again dissenting in favor of a 25 basis point increase.

Implications

The language suggests the FOMC sees slightly more downside risk to growth, but still expects moderate expansion. The unchanged inflation language and the continued dissent for a hike indicate the FOMC remains comfortable holding rates steady while monitoring incoming data.

Summary generated automatically from the statements. Not investment advice.