January 22, 30, 2008
Statement·Presser·Minutes·Policy
BBBen S. BernankeJanuary 30, 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 75 50 basis points to 3-1/2 3 percent.
Financial markets remain under considerable stress, and credit has tightened further for some businesses and households. Moreover, recent 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.
Appreciable Today’s policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth 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 address those risks.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred no change in the target for the federal funds rate at this meeting.
In a related action, the Board of Governors unanimously approved a 75-basis-point 50-basis-point decrease in the discount rate to 4 3-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Chicago Boston, New York, Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, Kansas City, and Minneapolis. San Francisco.
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.
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; Eric S. Rosengren; and Kevin M. Warsh. Voting against was William Poole, who did not believe that current conditions justified policy action before the regularly scheduled meeting next week. Absent and not voting was Frederic S. Mishkin.
Our summary
What changed
- Cut the federal funds rate by 50 basis points to 3 percent, a smaller reduction than the previous 75-basis-point cut.
- Removed language citing a weakening economic outlook and increasing downside risks as the rationale for the action.
- Replaced the easing of short-term funding strains with a statement that financial markets remain under considerable stress.
- Added that today's action, combined with earlier ones, should promote moderate growth and mitigate risks to economic activity.
- Approved a 50-basis-point cut in the discount rate to 3-1/2 percent, with a unanimous Board vote, and changed the dissenting voter from Poole to Fisher.
Implications
The smaller rate cut and the removal of explicit downside-risk language suggest the FOMC sees less urgency than in January, though it still acknowledges persistent stress and risks.
The added forward-looking sentence implies the FOMC views cumulative easing as supportive, potentially signaling a pause or more measured future moves.
Markets may interpret the shift in dissenting views and the unanimous discount rate action as a sign of greater internal agreement on the current policy path.
Summary generated automatically from the statements. Not investment advice.