Global| Jan 31 2006Fed Funds Rate Increased to 4.50%
by:Tom Moeller
|in:Economy in Brief
Summary
At today's meeting of the Federal Open Market Committee, the target interest rate for Federal funds was raised 25 basis points to 4.50%, the fourteenth increase since June of 2004. The unanimous decision was widely expected by [...]
At today's meeting of the Federal Open Market Committee, the target interest rate for Federal funds was raised 25 basis points to 4.50%, the fourteenth increase since June of 2004. The unanimous decision was widely expected by analysts. The discount rate also was raised 25 basis points to 5.50%.
The economy's slowdown in 4Q05 was noted in the Fed's statement. "Although recent economic data have been uneven, the expansion in economic activity appears solid."
This latest action, therefore, had a preemptive sense to it. The FOMC's press release stated "Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained. Nevertheless, possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures."
The latest statement's verbiage regarding the likelihood of future rate action was toned down slightly from "is likely to be needed" in the prior statement to "may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance."
Today's meeting was Chairman Alan Greenspan's last since taking over the Chairmanship in 1987.
For the complete text of the Fed's latest press release please clickhere.
The Fed's Monetary Policy Rule from William Poole, President of the Federal Reserve Bank of St. Louis, can be found here.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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