October 31, 2007
September 18, 2007
Statement·Presser·Minutes
BBBen S. BernankeOctober 31, 2007 FOMC Statement
FOMC statement
FOMC statement
For immediate release
The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 25 basis points to 4-3/4 4-1/2 percent.
Economic growth was moderate during solid in the first half third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the year, but near term, partly reflecting the tightening intensification of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. correction. Today’s action, combined with the policy action is intended to taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
Readings on core inflation have improved modestly this year. However, year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Developments in financial markets since The Committee judges that, after this action, the Committee’s last regular meeting have increased upside risks to inflation roughly balance the uncertainty surrounding the economic outlook. downside risks to growth. The Committee will continue to assess the effects of these financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric S. Rosengren; and Kevin M. Warsh. Voting against was Thomas M. Hoenig, who preferred no change in the federal funds rate at this meeting.
In a related action, the Board of Governors unanimously approved a 50-basis-point 25-basis-point decrease in the discount rate to 5-1/4 5 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, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, and San Francisco.
Our summary
What changed
- The FOMC lowered the federal funds rate by 25 basis points to 4-1/2 percent, a smaller cut than the previous 50-basis-point reduction.
- The statement upgraded the economic assessment, noting solid third-quarter growth and some easing of financial strains, while still expecting a near-term slowdown due to housing.
- The FOMC added a risk balance sentence, stating that upside risks to inflation now roughly balance downside risks to growth.
- The discount rate was cut by 25 basis points to 5 percent, with a different set of Federal Reserve Banks approving the action.
- The vote was not unanimous: Thomas M. Hoenig dissented, preferring no change in the federal funds rate.
Implications
The smaller rate cut and the new risk-balance language suggest the FOMC sees less urgency to ease further, possibly signaling a pause in the easing cycle.
The upgraded growth assessment and mention of easing financial strains may be read as a slightly more confident outlook, though the housing correction remains a concern.
The dissent from Hoenig, who preferred no change, could indicate internal debate about the need for additional cuts.
Summary generated automatically from the statements. Not investment advice.