Summary
Per my expectation (as well as virtually everyone else's), the Federal Open Market Committee today announced its decision to increase the target rate on federal funds by 25 basis points, to 4.25% from 4.00%. But leave it to Uncle Al to be the Wall Street Pal! Read on...
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The Federal Open Market Committee opted today to raise its target on the Federal Funds Rate to 4.25% from 4.00%. This marked the 13th rate increase in 13 policy meetings.
Concurrently, the Federal Reserve Board of Governors announced a quarter-point increase in the Discount Rate, to 5.25% from 5.00%.
Gone is "accommodative," one of the magic words of past FOMC statements. However, "measured," another of the magic words, remains.
In my view, something just like this was highly predictable -- Greenspan's attempt at conning stock bulls into immediately running out with a message of "the Fed is going on hold." Which was/is the immediate response, jacking the DJIA quickly to a gain of roughly 100 points.
(I'm currently listening to Bloomberg Radio, and it sounds like one giant economy/financial-market orgasm!)
Remember, though, that almost five terms of Greenspan have transformed the Federal Reserve into something that looks like everything else in Washington these days -- an infestation of politicians, a dearth of statesmen. Thus, there is the obligatory CYA language in today's statement, to wit:
"The Committee judges that some further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance. In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives."
The entire post-meeting statement, such as there is one, can be accessed at the GRA website's "Topical Links" section (left-hand column), or at "FOMC Statement."
The following table outlines the FOMC's 2005 actions to date.
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2005 SCHEDULED MEETINGS OF THE FEDERAL
OPEN MARKET COMMITTEE AND POLICY ACTIONS TAKEN
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Action Taken On
Meeting --------------------------------
Date Fed Funds Rate Discount Rate
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2005
Thru Dec. Meeting: 4.25% 5.25%
Opening '05 Levels: 2.25% 3.25%
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12/13 REGULAR MEETING, Action Taken:
+25bp to 4.25% +25bp to 5.25%
11/01 REGULAR MEETING, Action Taken:
+25bp to 4.00% +25bp to 5.00%
October NO SCHEDULED MEETING ----------->
09/20 REGULAR MEETING, Action Taken:
+25bp to 3.75% +25bp to 4.75%
08/09 REGULAR MEETING, Action Taken:
+25bp to 3.50% +25bp to 4.50%
July NO SCHEDULED MEETING ----------->
06/29-30 REGULAR MEETING, Action Taken:
+25bp to 3.25% +25bp to 4.25%
05/03 REGULAR MEETING, Action Taken:
+25bp to 3.00% +25bp to 4.00%
April NO SCHEDULED MEETING ----------->
03/22 REGULAR MEETING, Action Taken:
+25bp to 2.75% +25bp to 3.75%
02/01-02 REGULAR MEETING, Action Taken:
+25bp to 2.50% +25bp to 3.50%
January NO SCHEDULED MEETING ----------->
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2004
Closing '04 Levels: 2.25% 3.25%
Opening '04 Levels: 1.00% 2.00%
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