Global| Mar 18 2009FOMC Leaves Rates Unchanged At Historically Low Level; Fed's Balance Sheet Expanded
by:Tom Moeller
|in:Economy in Brief
Summary
In an anticipated move the Federal Open Market Committee today left the Federal funds rate in a "range from 0 to 1/4 percent." The discount also was left unchanged at 0.50%. The Fed funds rate remained the lowest ever. Regarding [...]
In an anticipated move the
Federal Open Market Committee today
left the Federal funds rate in a "range from 0 to 1/4
percent." The discount also was left unchanged at
0.50%. The Fed funds rate remained the lowest ever.
Regarding economic liquidity, the Fed focused on the housing market indicating that "To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion." Additional action to provide liquidity also was taken.
Regarding economic growth, the Fed indicated that "that the
economy continues to contract. Job losses, declining equity
and housing wealth, and tight credit conditions have weighed on
consumer sentiment and spending. Weaker sales prospects and
difficulties in obtaining credit have led businesses to cut back on
inventories and fixed investment."
"... the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth."
Regarding inflation the same statement was offered as at the last meeting. "... that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.
The decision was unanimous amongst FOMC voters.
For the complete text of the Fed's latest press release please follow this link.
The Fed's effort to liquefy the economic system has
succeeded. Growth in the money supply measure M2 has been
running at double-digit rates versus five-to-six percent from 2006 and
during all of 2008. Over the last three months growth in MZM
(M2 less time deposits, plus all money market funds) has been 22%
versus 14% during all of last year and 9% during 2007. 
Growth
in the monetary base ran at a 32% annual rate from November to March
after the level of the base doubled last autumn. This year,
the bond market has met these liquidity injections with uncertainty but
on balance has been not overly concerned about the eventual
inflationary consequences.
The Haver databases USECON, WEEKLY and DAILY contain the figures from the Federal Reserve Board.
Credit and Liquidity Programs and the Balance Sheet from the Federal Reserve Board is available here.
G-20 Asks IMF to Track, Assess Global Crisis Response is a recent article published in the IMF Survey Magazine: In the News and it can be found here.
| Current | Last | December | 2008 | 2007 | 2006 | |
|---|---|---|---|---|---|---|
| Federal Funds Rate, % (Target) | 0.00 - 0.25 | 0.00 - 0.25 | 0.16 | 1.93 | 5.02 | 4.96 |
| Discount Rate, % | 0.50 | 0.50 | 0.50 | 2.39 | 5.86 | 5.96 |
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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