Below is the statement released by the Federal Open Market Committee after its March 18 meeting on interest rate policy:
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 2-1/4 percent.
Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.
Inflation has been elevated, and some indicators of inflation expectations have risen. 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 has increased. It will be necessary to continue to monitor inflation developments carefully.
Today’s policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will act in a timely manner 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; Gary H. Stern; and Kevin M. Warsh. Voting against were Richard W. Fisher and Charles I. Plosser, who preferred less aggressive action at this meeting.
In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 2-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, and San Francisco.
Market seems to be less disappointed than I expected. $SPX is only down 15.
Comment by Options Strategery — Tuesday, March 18, 2008 @ 11:53 am
Seems like the American economy is only getting worse with no sign of a turn around for years to come in the value of the dollar.
Comment by Leon — Tuesday, March 18, 2008 @ 6:40 pm
OS,
I was disappointed Tuesday but wasn’t surprised Wednesday. Fed’s putting themselves in a small corner if you ask me. I hope they keep interest rates this low for about a year though so that my wife and I can purchase a house at a decent price/rate!
Leon,
FedEx just reported this morning and while revenue was up, they’ve guided down which leads me to believe that they’re seeing the US in a slowdown.
Disclaimer: My father works for FDX.
Comment by Jorge — Thursday, March 20, 2008 @ 4:47 am