Summary
As was generally expected, the Federal Open Market Committee today announced its decision to hike the target rate on federal funds by 25 basis points, from 1.50% to 1.75%. Concurrently, the Federal Reserve Board of Governors announced a quarter point increase in the Discount Rate, from 2.25% to 2.50%.
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Although the FOMC has now increased its target rate on federal funds by 75 basis points since the end of June, the funds rate remains well below the inflation rate. This is so even if you accept that the 2.7% year-over-year change in the Consumer Price Index adequately reflects inflation.
(NOTE: Tomorrow, we will publish the third installment in John Williams' series on government data and the reporting thereof. It so happens that this installment deals with the Consumer Price Index.)
Today's post-meeting statement continues to frame FOMC policy in language not terribly different than in the communiques coming out of recent meetings. As I see matters, the key wording in today's statement reads:
"After moderating earlier this year partly in response to the substantial rise in energy prices, output growth appears to have regained some traction, and labor market conditions have improved modestly...With underlying inflation expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured."
If you would like to read the entire statement, you can find it either in the "Topical Links" section of the website or by using the following link: FOMC Statement.
The following table breaks out the Federal Reserve's policy decisions from today's meeting back through the beginning of 2001.
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2004-2001 SCHEDULED MEETINGS OF THE FEDERAL
OPEN MARKET COMMITTEE AND POLICY ACTIONS TAKEN
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2004
Thru 9/21 Meeting: 1.75% 2.75%
Opening '04 Levels: 1.00% 2.00%
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Action Taken On
Meeting --------------------------------
Date Fed Funds Rate Discount Rate
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9/21 REGULAR MEETING, Action Taken:
+25BP to 1.75% +25BP to 2.75%
8/10 REGULAR MEETING, Action Taken:
+25BP to 1.50% +25BP to 2.50%
July NO SCHEDULED MEETING ------------>
06/29-30 REGULAR MEETING, Action Taken:
+25BP to 1.25% +25BP to 2.25%
05/04 REGULAR MEETING, No Action Taken
April NO SCHEDULED MEETING ------------>
03/16 REGULAR MEETING, No Action Taken
February NO SCHEDULED MEETING ------------>
01/27-28 REGULAR MEETING, No Action Taken
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2003
Closing Levels: 1.00% 2.00%*
Opening Levels: 1.25% 0.75%
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12/09 REGULAR MEETING, No Rate Action;
policy bias shifted to a neutral
stance, the first step towards
possible rate increases in 2004.
November NO SCHEDULED MEETING ------------>
10/28 REGULAR MEETING, No Action Taken
09/16 REGULAR MEETING, No Action Taken
08/12 REGULAR MEETING, No Action Taken
July NO SCHEDULED MEETING ------------>
06/24-25 REGULAR MEETING, Action Taken:
-25BP to 1.00% -25BP to 2.00%*;
policy bias left unchanged, leav-
door open to possible additional
rate cut(s).
05/06 REGULAR MEETING, No Rate Action;
policy bias shifted to favoring
possible additional rate cut(s).
April NO SCHEDULED MEETING ------------>
03/18 REGULAR MEETING, No Action Taken
February NO SCHEDULED MEETING ------------>
01/28-29 REGULAR MEETING, No Action Taken
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*Method for setting Discount
Rate changed during 2002.
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2002
Closing Levels: 1.25% 0.75%
Opening Levels: 1.75% 1.25%
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12/10 REGULAR MEETING No Action Taken
11/06 REGULAR MEETING, Action Taken:
-50BP to 1.25% -50BP to 0.75%;
policy bias shifted to "neutral."
October NO SCHEDULED MEETING ------------>
09/24 REGULAR MEETING, No Action Taken
08/13 REGULAR MEETING, No Rate Action;
policy bias shifted to favoring
possible additional rate cut(s).
July NO SCHEDULED MEETING ------------>
06/25-26 REGULAR MEETING, No Action Taken
05/07 REGULAR MEETING, No Action Taken
April NO SCHEDULED MEETING ------------>
03/19 REGULAR MEETING, No Rate Action;
policy bias shifted to "neutral"
February NO SCHEDULED MEETING ------------>
01/29-30 REGULAR MEETING, No Action Taken
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2001
Closing Levels: 1.75% 1.25%
Opening Levels: 6.50% 6.00%
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12/11 REGULAR MEETING, Action Taken:
-25BP to 1.75% -25BP to 1.25%
11/06 REGULAR MEETING, Action Taken:
-50BP to 2.00% -50BP to 1.50%
10/02 REGULAR MEETING, Action Taken:
-50BP to 2.50% -50BP to 2.00%
09/17 NO MEETING, Interim Action Taken:
-50BP to 3.00% -50BP to 2.50%
08/21 REGULAR MEETING, Action Taken:
-25BP to 3.50% -25BP to 3.00%
July NO SCHEDULED MEETING ------------>
06/26-27 REGULAR MEETING, Action Taken:
-25BP to 3.75% -25BP to 3.25%
05/15 REGULAR MEETING, Action Taken:
-50BP to 4.00% -50BP to 3.50%
04/18 NO MEETING, Interim Action Taken:
-50BP to 4.50% -50BP to 4.00%
April NO SCHEDULED MEETING ------------>
03/20 REGULAR MEETING, Action Taken:
-50BP to 5.00% -50BP to 4.50%
Feb. NO SCHEDULED MEETING ------------>
01/30-31 REGULAR MEETING, Action Taken:
-50BP to 5.50% -50BP to 5.00%
01/04 NO MEETING, Interim Action Taken:
-25BP to 5.50%
01/03 NO MEETING, Interim Action Taken:
-50BP to 6.00% -25BP to 5.75%
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