October 29, 2008 FOMC Statement

FOMC statement

FOMC statement FOMC statement: Federal Reserve and other central banks announce reductions in policy interest rates

For immediate release For release at 7:00 a.m. EDT

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 1 percent.

Incoming economic data suggest that the The pace of economic activity has appears to have slowed markedly markedly, owing importantly to a decline in consumer expenditures. Business equipment spending and industrial production have weakened in recent months. months, and slowing economic activity in many foreign economies is damping the prospects for U.S. exports. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit. Inflation has been high, but the Committee believes that the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation.

In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate in coming quarters to levels consistent with price stability.

Recent policy actions, including today’s rate reduction, coordinated interest rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth. Nevertheless, downside risks to growth remain. The Committee will monitor economic and financial developments carefully 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; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 1-3/4 1-1/4 percent. In taking this action, the Board approved the request requests submitted by the Board Boards of Directors of the Federal Reserve Bank Banks of Boston. Boston, New York, Cleveland, and San Francisco.

Joint Statement by Central Banks

Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets.

Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability.

Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions.

Federal Reserve ActionsThe Federal Open Market Committee has decided to lower its target for the federal funds rate 50 basis points to 1-1/2 percent. The Committee took this action in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.

Information on Actions Taken by Other Central BanksInformation on the actions that will be taken by other central banks is available at the following websites:

Bank of Canada   Bank of England  European Central Bank Sveriges Riksbank (Bank of Sweden) Swiss National Bank (68 KB PDF)

Statements by Other Central BanksBank of Japan (79 KB PDF)

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