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Economy in Brief

FOMC Left Funds Rate Again at 2.00%
by Tom Moeller September 16, 2008

As expected, the Federal Open Market Committee left the Federal funds rate unchanged today at 2.00%. The discount rate also was left unchanged at 2.25%.

If the Fed had eased, it would have been in the name of boosting market psychology. The markets have been rattled by a significant number of downside risks to economic growth. These include strains in the financial sector as well as weaker labor markets. Weaker consumer spending, tight credit conditions, the housing contraction and slower export growth also were sited in the statement as constraints on economic growth.

While acknowledging these risks, the Fed stated that "Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth."

The Fed's statement regarding inflation was unchanged from the last meeting. "Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities, and some indicators of inflation expectations have been elevated. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain."

The decision was unanimous amongst FOMC voters.

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

How Economic News Moves Markets from the Federal Reserve Bank of New York can be found here.

What Drives Housing Prices? also from the Federal Reserve Bank of New York is available here.

  Current Last August 2007 2006 2005
Federal Funds Rate, % (Target) 2.00 2.00 2.00 5.05 4.96 3.19
Discount Rate, % 2.25 2.25 2.25 5.86 5.96 4.19
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