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Economy in Brief

FOMC Holds Interest Rates Unchanged; Will Extend The Average Maturity Of Treasury Holdings
by Tom Moeller  September 21, 2011

As expected, the Federal Open Market Committee today left the Federal funds rate in a "range from 0 to 1/4 percent." The Fed funds rate has remained unchanged since late-2008 at its lowest level ever. The discount rate also was left unchanged at 0.75%. The Fed indicated that the economy may warrant an exceptionally low Fed funds rate at least "through mid-2013."

A change in policy was indicated in the statement "... the Committee decided today to extend the average maturity of its holdings of securities." The intent clearly is to lower long-term interest rates to stimulate borrowing.

The Fed indicated its concern about the rate of economic growth. "... point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased. Investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand."

"Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable."

In this low interest rate environment, growth in the money stock has surged though growth in the monetary base has turned negative.

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.

  Current Last 2010 2009 2008
Federal Funds Rate, % (Target) 0.00-0.25 0.00-0.25 0.17 0.16 1.93
Discount Rate, % 0.75 0.75 0.72 0.50 2.39
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