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Economy in Brief

U.S. Fed Funds Interest Rate Held Stable
by Tom Moeller   September 22, 2010

At yesterday's meeting of the Federal Open Market Committee, the Federal Funds rate was held at 0.125% where it has been since December 2008. The discount rate also was held constant at 0.75%. In the Fed's statement released after the meeting, it indicated that the "pace of the recovery in output and employment has slowed in recent months." Regarding inflation, the Fed indicated that "With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the Committee considers consistent with its mandate."

Financial market indicators recently have flashed conflicting signals, despite the low inflation environment. The interest rate yield curve has narrowed as the rate on  10-Year Treasury notes has fallen to 2.72% from the April high of 3.85%. Conversely, the foreign exchange value of the U.S. dollar is off 6.0% from its recent peak during June. Growth in the money supply (M2) decelerated to 0.9% over the past 13 weeks from 1.7% reached during July. Perhaps that reflects some lethargy in money demand due to weaker consumer spending. Similarly, growth in the monetary base has slowed considerably.

The financial market data can be found in Haver's WEEKLY database.

The Fed's statement following yesterday's FOMC meeting can be found here.

Financial Market Indicators 09/22/10 08/10 12/09 2009 2008 2007
Fed Funds Rate 0.13% 0.13% 0.13% 0.13% 2.08% 5.05%
10 Year Treasury Note 2.72 2.70 3.59 3.26 3.66 4.63
Money Supply - M2 (13 Week) 0.91 0.94 1.05 7.9 7.1 6.4
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