FOMC Boosts Target Fed Funds Rate

By John S. McClenahen The next scheduled meeting of the Federal Open Market Committee (FOMC) is Nov. 10, about a week after this years presidential and congressional elections. The 12 voting members of the panel, chaired by Alan Greenspan, probably will continue their "measured" process of raising U.S. short-term interest rates. A 25-basis-point increase seems likely. What is not speculative, however, is the FOMCs Sept. 21 action. The panel raised the target federal funds rate, the interest rate banks charge each other on overnight loans, to 1.75% from 1.5%. "The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity," the FOMC said in a post-meeting statement. It added, "the Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters to be roughly equal." In other words, the panel is not particularly worried about either an unwelcome slowdown in the economy or, even with recent energy price increases, a dramatic increase in inflation.

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