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Economy in Brief

FOMC Leaves Rates Unchanged; Cites Slower Economic Contraction & Subsiding Threat From Low Pricing Power
by Tom Moeller June 24, 2009

In an anticipated move, the Federal Open Market Committee today left the Federal funds rate in a "range from 0 to 1/4 percent." The discount also was left unchanged at 0.50%. The Fed funds rate remained the lowest ever. The decision was unanimous amongst FOMC voters.

The Fed indicated that "Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months.

Much of the commentary on the economy was similar to the last meeting and concluded that "Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability."

Regarding inflation, the wording of the statement was slightly altered. The statement that "the Committee expects that inflation will remain subdued for some time" replaced the earlier statement that "the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term."

In its effort to promote economic liquidity, the Fed used the same language as in April, "... to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn."

For the complete text of the Fed's latest press release please follow this link.The Haver databases USECON, WEEKLY and DAILY contain the figures from the Federal Reserve Board.

Uncertainty About When the Fed Will Raise Interest Rates from the Federal Reserve Bank of St. Louis is available here.

  Current Last December 2008 2007 2006
Federal Funds Rate, % (Target) 0.00 - 0.25 0.00 - 0.25 0.16 1.93 5.02 4.96
Discount Rate, % 0.50 0.50 0.50 2.39 5.86 5.96
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