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Economy in Brief

FOMC Notes Economic & Job Market Improvement But Leaves Rates Unchanged
by Tom Moeller December 16, 2009

In an anticipated and unanimous vote, the Federal Open Market Committee today left the Federal funds rate in a "range from 0 to 1/4 percent." The discount rate also was left unchanged at 0.5%. The action was as expected and left the Fed funds rate at its lowest level ever.

"Information received since the Federal Open Market Committee met in November suggests that economic activity has continued to pick up and that the deterioration in the labor market is abating." Thus reads the opening statement from today's FOMC meeting press release. The statement then cites improvement in each of the economy's sectors; however, it notes that activity "is likely to remain weak for a time ..."

The statement goes on to suggest that economic strengthening will result from monetary & fiscal stimulus.

The Fed mentioned price inflation twice, indicating that "higher levels of resource utilization would occur in the context of price stability" and that "inflation will remain subdued for some time" as resource utilization remained low.

Again the Fed indicated that moderate economic growth and slack capacity utilization would allow rates to say low for an extended period of time. Also, "To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter of 2010."

A complete text of the Fed's latest press release can be found here.

The Haver databases USECON, WEEKLY and DAILY contain the figures from the Federal Reserve Board.

Supply and Demand Shocks in Residential Mortgages from the Federal Reserve Bank of Cleveland can be found 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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