FOMC Raises Federal Funds Target To 1.5%

By John S. McClenahen As expected, on Aug. 10 the Federal Open Market Committee (FOMC) raised the target for the highly influential federal funds rate to 1.5%. It had been at 1.25% since the end of June. "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 12 voting members of the FOMC said in a statement. The panel noted that growth in GDP has slowed recently -- as has job creation. "The economy nevertheless appears poised to resume a stronger pace of expansion going forward." And the FOMC will be tracking inflation closely. "With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability."

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