January 22, 2008 FOMC Statement

FOMC statement

FOMC statement

For immediate release

The Federal Open Market Committee has decided today to lower its target for the federal funds rate 25 75 basis points to 4-1/4 3-1/2 percent.

The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth.  While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households.  Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.

The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.

Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic Appreciable downside risks to growth and inflation. remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to foster price stability and sustainable economic growth. address those risks.

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 Eric S. Mishkin; William Poole; Rosengren; and Kevin M. Warsh. Voting against was Eric S. Rosengren, William Poole, who preferred to lower did not believe that current conditions justified policy action before the target for the federal funds rate by 50 basis points at this meeting. regularly scheduled meeting next week. Absent and not voting was Frederic S. Mishkin.

In a related action, the Board of Governors unanimously approved a 25-basis-point 75-basis-point decrease in the discount rate to 4-3/4 4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Chicago and St. Louis. Minneapolis.

Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks.  Today’s action, combined with the policy actions taken earlier, should help promote moderate growth over time.

Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation.  In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

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