Global| Aug 08 2006Federal Funds Rate Steady at 5.25%
by:Tom Moeller
|in:Economy in Brief
Summary
The Federal Open Market Committee held steady the target interest rate for Federal funds at 5.25% at today's meeting. Voting against the decision, after seventeen 25 basis point increases since June 2004, was Jeffrey M. Lacker who [...]
The Federal Open Market Committee held steady the target interest rate for Federal funds at 5.25% at today's meeting. Voting against the decision, after seventeen 25 basis point increases since June 2004, was Jeffrey M. Lacker who preferred an increase of 25 basis points in the federal funds rate target.
The discount rate also held steady at 6.25%.
Today's decision was widely expected by analysts.
The Fed's rationale for leaving rates unchanged was that "Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices."
Moreover, "... inflation pressures seem likely to moderate over time, reflecting contained inflation expectations and the cumulative effects of monetary policy actions and other factors restraining aggregate demand."
For the complete text of the Fed's latest press release please follow this link.
The accompanying chart plots the U.S. economy's actual rate of growth versus its so called "potential", i.e., growth in the labor force plus the growth in labor's productivity. The figures are updated for this morning's downward revisions to recent productivity and indicate that GDP growth of 3.5% trailed its potential of 4.0%.
The Taylor Rule: A Guidepost for Monetary Policy? from the Federal Reserve Bank of Cleveland can be found here.
Monetary Policy in a Global Environment from the Federal Reserve Bank of San Francisco is available 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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