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Economy in Brief

FOMC: Funds Rate Steady, Economy OK, Inflation Risks Remain
by Tom Moeller December 12, 2006

At today's Federal Open Market Committee meeting the target interest rate for Federal funds was held steady at 5.25%. The rate was increased to the current level at the FOMC meeting in late June.

Voting against the decision for the fourth consecutive meeting was Richmond Federal Reserve Bank President Jeffrey M. Lacker, who preferred an increase of 25 basis points in the federal funds rate target.

The discount rate also was held steady at 6.25%.

Today's decision was widely expected by analysts.

For the economy today's press release indicated that "Economic growth has slowed ...." but that "the economy seems likely to expand at a moderate pace on balance over coming quarters."

Regarding inflation the Fed indicated that "... core inflation (readings) have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time ..."

For the complete text of the Fed's latest press release please follow this link.

Trend Inflation and Inflation Persistence in the New Keynesian Phillips Curve from the Federal Reserve Bank of New York can be found here.

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