June 25, 2008 FOMC Statement

FOMC statement

FOMC statement

For immediate release

The Federal Open Market Committee decided today to lower keep its target for the federal funds rate 25 basis points to at 2 percent.

Recent information indicates that overall economic activity remains weak. Household and business spending has been subdued and continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further. Financial further and financial markets remain under considerable stress, and tight stress. Tight credit conditions and conditions, the deepening ongoing housing contraction contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters.

The Committee expects inflation to moderate later this year and next year.  However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.

The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and time. Although downside risks to mitigate growth remain, they appear to have diminished somewhat, and the upside risks to economic activity. inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.

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 were was Richard W. Fisher and Charles I. Plosser, Fisher, who preferred no change an increase in the target for the federal funds rate at this meeting.

Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully.

In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 2-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Atlanta, and San Francisco.

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