FOMC Unanimously Votes to Cut Target Rate 50 Basis Points to 1.00%

The Federal Reserve announced Wednesday that it would cut the Federal funds target rate by half a point, as widely expected, to 1.00%. The accompanying statement said economic activity had decreased markedly from a decline in consumer expenditure.

In the growth paragraph, the FOMC said: "Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for U.S. exports."

On inflation, the Committee said they expect inflation "to moderate in coming quarters to levels consistent with price stability."

The Fed said recent policy actions should "help over time to improve credit conditions and promote a return to moderate economic growth." They noted that "downside risks to growth remain" and said they would "monitor economic and financial developments carefully," taking more action if necessary.

The FOMC also opted to slash the discount rate 50 basis points at 1.25%.

The FOMC meeting passed with all 10 members voting in favour of the action. Voting for the FOMC monetary policy action were: Ben S. Bernanke, chairman; Timothy F. Geithner, vice chairman; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.

Since September 2007, the Federal Reserve has cut the target interest rate by 425 basis points, from 5.25% to 1.00%.

By Patrick McGee and edited by Nancy Girgis
©CEP News Ltd. 2008