FOMC Holds Target Rate at 2.00%, Cites Uncertainty in Inflation Outlook
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The Federal Reserve announced Wednesday that it would hold the Fed funds target rate at 2.00%, as was widely expected. The accompanying statement was balanced between a concern for slowing growth and rising uncertainty in inflation.
In the statement, the Fed said "overall economic activity continues to expand, partly reflecting some firming in household spending."
Inflation is expected to "moderate later this year and next year," but "uncertainty about the inflation outlook remains high," the statement said. Moreover, "the upside risks to inflation and inflation expectations have increased."
The Fed said labour markets have "softened further" and that financial markets "remain under considerable stress."
The Fed said "downside risks to growth remain" but appear to have "diminished somewhat," confirming Chairman Ben Bernanke's comments on June 9.
"Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters," the statement read.
The only dissenting voice in the FOMC decision was Dallas Fed president Richard Fisher, who preferred an increase in the target rate.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.
The hold in rates was widely anticipated by markets.
By Patrick McGee and edited by Stephen Huebl
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