WASHINGTON (10/8/08)—In an unexpected action, the Federal Open Market Committee (FOMC) Wednesday morning slashed its target for the federal funds rate 50 basis points 1.5%. The FOMC in a statement said it took the action in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.
According to the FOMC, incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. "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," it said.
"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," said the committee.
The FOMC said it 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 1.75%.
courtesy of cuna.org