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Economy in Brief

FOMC: Funds & Discount Rates Cut; Spread of Housing Weakness Feared
by Tom Moeller September 18, 2007

At today's Federal Open Market Committee meeting the target interest rate for Federal funds was cut by 50 basis points to 4 3/4 percent. It was the first drop in the rate since 2003.

The discount rate also was cut 50 basis points to 5 1/4 percent.

For the economy today's press release indicated worry that "the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally."

Regarding inflation the Fed indicated that "that some inflation risks remain, and (the FOMC) will continue to monitor inflation developments carefully".

The decision to lower interest rates was unanimous amongst FOMC members.

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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