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Economy in Brief

FOMC Left Fed Funds Rate Unchanged at 2.00%
by Tom Moeller June 25, 2008

As widely expected, the Federal Open Market Committee left the Federal funds rate unchanged today at 2.00%. The Fed had been steadily lowering the rate since its high of 6.25% in July of last year, where it had been for roughly 12 months.

The discount rate also was left unchanged at 2.25%.

Regarding the economy the Fed indicated "that overall economic activity continues to expand, partly reflecting some firming in household spending." To the downside was noted a greater number of risks that "labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters."

Regarding price inflation it was stated that the "Committee expects inflation to moderate later this year and next year." However risks to this outlook were deemed high given an elevated level of energy, other commodity prices and inflation expectations.

The Fed's statement indicated that the downside risks to economic growth have diminished and that the upside risks to inflation have increased.

The decision was unanimous except that Richard W. Fisher, President of the Federal Reserve Bank of Dallas, preferred an increase in the target for the federal funds rate at this meeting.

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

Liquidity Crisis from the Federal Reserve Bank of Philadelphia can be found here.

  Current Last May 2007 2006 2005
Federal Funds Rate, % (Target) 2.00 2.00 1.98 5.02 4.96 3.19
Discount Rate, % 2.25 2.25 2.25 5.86 5.95 4.18
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