Global| Jun 29 2006Fed Funds Rate Increased to 5.25%
by:Tom Moeller
|in:Economy in Brief
Summary
The Federal Open Market Committee raised the target interest rate for Federal funds 25 basis points to 5.25% at today's meeting. This seventeenth 25 basis point increase since June of 2004 was the result of a unanimous decision. The [...]
The Federal Open Market Committee raised the target interest rate for Federal funds 25 basis points to 5.25% at today's meeting. This seventeenth 25 basis point increase since June of 2004 was the result of a unanimous decision.
The discount rate also was raised 25 basis points to 6.25%.
The action was widely expected by analysts though market disappointment that rates weren't increased 50 basis points may be evident in yesterday's rise in gold prices.
The Fed's rationale for a 25 basis point increase was that "Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year ..." and that "inflation expectations remain contained."
Ever vigilant for building inflationary pressure, the Fed statement succinctly stated that "the Committee judges that some inflation risks remain."
For the complete text of the Fed's latest press release please follow this link.
Market anticipation of recent Fed action is reflected in the decline, since early May, in gold futures prices and the so called "TIPS spread."
Reading the Minds of Investors: An Empirical Term Structure Model for Policy Analysis from the Federal Reserve Board is available here.
Reflections on the Yield Curve and Monetary Policy is Chairman Ben S. Bernanke's March speech and it 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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