August 05, 2008
June 25, 2008
Statement·Presser·Minutes
BBBen S. BernankeAugust 5, 2008 FOMC Statement
FOMC statement
FOMC statement
For immediate release
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
Recent information indicates that overall economic Economic activity continues to expand, expanded in the second quarter, partly reflecting some firming growth in household spending. consumer spending and exports. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in elevated energy prices are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.
The Committee expects inflation to moderate later this year and next year. However, in light of Inflation has been high, spurred by the continued earlier increases in the prices of energy and some other commodities commodities, and the elevated state of some indicators of inflation expectations, uncertainty about expectations have been elevated. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains high. highly uncertain.
The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time. Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. are also of significant concern to the Committee. 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; Elizabeth A. Duke; 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 an increase in the target for the federal funds rate at this meeting.
Our summary
What changed
- The FOMC noted that economic activity expanded in the second quarter, citing growth in consumer spending and exports.
- The statement now says 'elevated energy prices' instead of 'the rise in energy prices' as a factor weighing on growth.
- Inflation language was updated: it states inflation has been high due to earlier commodity price increases, and elevated inflation expectations are mentioned.
- The phrase 'the upside risks to inflation and inflation expectations have increased' was replaced with 'the upside risks to inflation are also of significant concern.'
- The vote remained the same, with Fisher dissenting, but Duke replaced Mishkin as a voting member.
Implications
The shift from 'increased' to 'significant concern' suggests the FOMC is maintaining a hawkish tilt on inflation risks without escalating language. The explicit mention of 'earlier' price increases implies the inflation surge may be viewed as partly transitory, but the elevated expectations keep uncertainty high. Markets might see this as a signal that rates will stay on hold unless inflation expectations worsen or growth deteriorates further.
Summary generated automatically from the statements. Not investment advice.