Daily Forex Technicals | Written by DailyFX | Oct 08 08 14:12 GMT |
The world's largest central banks dealt the carry trade a major blow this morning by announcing a joint rate cut. As the proxy funding currency for this popular trading strategy, the increased volatility and reduced returns have sent the yen on an impromptu rally. Now with trends revived and risk ballooning, the need for a sound strategy is imperative. To see how our DailyFX Analysts are positioning with markets in turmoil, read on.
Senior Currency Strategist - Jamie Saettele
My picks: Stay short USDJPY, move risk to 103.30, target below 95.71
Expertise: Technical
Average Time Frame of Trades: 1 Month
Last week for the Yen pick, I wrote that "the USDJPY is still in a range. I favor the downside as long as price is below the trendline from the 110.71 top. However, failure to continue lower through 103.50 does not instill confidence in the bearish bias." Moving risk to 103.30 locks in a couple hundred pips but the larger target is below the April low.
Currency Strategist - John Kicklighter
My picks: Pending CHFJPY Short
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week
The fundamental environment in the currency market has been shaken violently over the past 12 hours. In an effort to stabalize global markets, major central banks have took the unprecedented effort of a joint interest rate cut. It is simply coincidence that this happens on the same day that we are looking through the yen pairs for a potential setup. For the carry trade, this move looks to reestablish balance in investor confidence (though the market will have to tell us whether this will be the end effect or not); but it also lowers the return on the carry trade - further tipping the scales on the necessary return needed to offset its risk. As such, most of the yen crosses have plunged in response. Considering this was such an aggressive move in response to an exogenous market even, it is dangerous to chase a trend that is bourne of temporary factors. Therefore, I am looking at a pair that still has a technical hurddle to cross and therefore will really depend on a new trend: CHFJPY.
Support is centered on the 38.2 percent retracement of the September 2000 to July 2008 bull run at 87.50. This is the technical line in the sand that is holding back a greater bear run. As such, I'll wait until there is a daily close below this key technical (perhaps even below 87.00) before considering a short. Any position taken will have a wide stop (to account for the high volatility) and my targets will be staggered to increase the probability of a profitable trade. The first objective will match the risk taken, and the second will be more aggressive. To secure a profitable trade, the stop on the second lot will be moved to breakeven when the first half takes profit.
Currency Analyst - David Rodriguez
My picks: Stay short USDJPY
Expertise: System Trading
Average Time Frame of Trades: 2-10 weeks
On Monday I reiterated my preference to sell the USDJPY, and given ongoing market turmoil, it seems likely that we can see the pair continue to tumble through the near term. In fact, the US Dow Jones Industrials Average is set to open sharply lower despite coordinated central bank rate cuts, and there seems little in the way of further Dow declines.
Currency Analyst - Ilya Spivak
My picks: USDJPY Short (Pending)
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
Gauging the markets' response to various forms of stimulus over recent days, it appears traders have settled on monetary easing as the favorite confidence-boosting measure. Price action handsomely rewarded the RBA yesterday as Glenn Stevens and company slashed rates by 100 basis points: US index futures gained, some European exchanges actually managed to close in the plus column, and safe haven assets from Treasuries to the Yen declined. Today offers a counterpoint, as traders continued to sell stocks aggressively despite a new liquidity-boosting scheme from the Fed, a $22 billion capital injection from Australia and Japan, and a UK bank rescue plan. This puts the need for meaningful near-term central bank action in sharp relief, father fueling speculation of a coordinated rate cut in the near term. Should this happen, it is likely to produce a flash of exuberance that will send both stock markets and USDJPY higher. Technically, the longer-term bias in USDJPY favors a bearish outlook after the pair broke down out of a Rising Wedge formation that characterized price action since March. Look for a corrective rally to get short, ultimately targeting a test of the 2008 low at 95.71.
Currency Analyst - John Rivera
My picks: Short EURJPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1-2 Days
I am still bullish the Yen crosses and last week it paid off well. Yet, I am more cautious this week, especially after the coordinated rate cut by the central banks. Nevertheless, I am sticking with the trend especially after the ECB lower rates by 50bps which should weigh on the Euro once markets digest the historic actions of today. Despite the efforts today, we still saw Dow futures trading lower after a spike higher and European stocks give back gains. Therefore, risk aversion is still prevalent in the market and should remain supportive of the Yean crosses. Target 131 the June, 2005 low.
Currency Analyst - David Song
My picks: Short NZD/JPY
Expertise: Fundamentals Combined with Technicals
Average Time Frame of Trades: 2 - 10 Days
Despite the coordinated efforts by the central bank, the flight to saftey among investors has certainly increased the appeal of low-yielding currencies, and I anticipate the rise in risk aversion to continue to benefit the Japanese yen. On 9/22, I noted that the underlying downtrend for the NZDJPY would lead the pair lower, and anticipated that the pair would work its way down towards the 9/16 low of 67.21. In fact, the kiwi-yen has fallen through key support levels recently, and I expect the downward momentum to carry the pair lower over the week. I anticipate fading risk sentiments to drive the pair below 56.50 over the next few days, and I anticipate the NZDJPY to test the 9/5/02 low of 54.64 for support on its way to the downside.
DailyFX
Disclaimer
Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.
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Wednesday, October 8, 2008
Mid-Day Report: Markets Shrug off Coordinated Rate Cuts
Market Overview | Written by ActionForex.com | Oct 08 08 14:41 GMT |
Federal Reserve, European Central Bank, Bank of England, Bank of Canada, Swiss National Bank and Sweden's Riksbank join forces today in a historical, emergency, coordinated global rate cuts by 50bps ease save the world's economies from the worst crisis since the Great Depression. Fed, ECB, BoE, BoC and Riksbank will cut by 50bps. SNB cut by 25bps. PBoC of China also joins to cut by 27bps. BoJ didn't participate but said it supports the move.
The resulting interest rates are:
* Fed - 1.50%
* ECB - 3.75%
* BoE - 4.50%
* BoC - 2.50%
* SNB - 2.50%
* Riksbank - 4.25%
Equity markets response positively to the announcement initially with FTSE 100 turned positive. However, European stock markets lacked follow through strength and turned south again. US stock indices are mixed in tight range.
In the forex markets, yen gives back earlier gains against most major currencies but in general, it's still holding in established tight range. Dollar also continues to consolidate against most major currencies. Aussie recovers after diving to as low as 0.6445 earlier today. However, note that key near term levels still holds. Dollar index retreats mildly but is still holding above 80 level. There is no change in the yen and dollar bullish outlook.
Earlier today, UK government announced a plan to invest about 50b pounds to prevent collapse of the UK banking system. The government will buy preference shares and BoE will make 200b or above available for banks to borrow under the special liquidity plan. UK government will also provide a guarantee of 250b pounds to help refinance debts. Tomorrow's BoE meeting is cancelled after today's rate cut.
On the data front, US pending home sales beat expectations by rising 7.4% mom in Aug. Canadian housing starts rose slightly from revised 217k to 218k in Aug. Germany industrial production rose 3.4% mom, 1.7% yoy in Aug. Eurozone Q2 GDP was finalized at -0.2% qoq, 1.4% yoy.
Suggested Readings:
* Global: Coordinated Central Bank Action
* Everyone Seems To Have Gotten The Message
* Coordinated Interest Rate Cuts - Too Little, Too Late?
* FOMC, ECB, BoE, SNB and BoC Cut Rates in Coordinated Effort
* There It Is: A Coordinated Rate Cut by Seven Monetary Authorities
* Fed, ECB, BoE, SNB, BOC and even PBOC Coordinate a Rate Cut - What Does it All Mean?
* Global Coordinated Rate Cut
* Coordinated Rate Cut From the Major Central Banks
GBP/JPY Mid-Day Outlook
Daily Pivots: (S1) 174.68; (P) 178.32; (R1) 180.71; More
GBP/JPY's break of 174.03 indicates fall from 197.42 has resumed. Further decline is now expected to next short term target of 100% projection of 215.87 to 184.47 from 197.42 at 166.02 first. On the upside, above 182.19 will indicate that a short term bottom might be in place and bring lengthier consolidation before resuming the medium term down trend.
In the bigger picture, 180 psychological support is taken out decisively. GBP/JPY is now pressing long term rising trend line support (129.32, 148.19). Sustained trading below will encourage fall to next medium term target of 100% projection of 251.09 to 192.60 from 215.87 at 157.38 and probably further to 148.19 low. On the upside, above 197.42 is needed to confirm that a medium term bottom is formed. Otherwise, outlook remains bearish.
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Federal Reserve, European Central Bank, Bank of England, Bank of Canada, Swiss National Bank and Sweden's Riksbank join forces today in a historical, emergency, coordinated global rate cuts by 50bps ease save the world's economies from the worst crisis since the Great Depression. Fed, ECB, BoE, BoC and Riksbank will cut by 50bps. SNB cut by 25bps. PBoC of China also joins to cut by 27bps. BoJ didn't participate but said it supports the move.
The resulting interest rates are:
* Fed - 1.50%
* ECB - 3.75%
* BoE - 4.50%
* BoC - 2.50%
* SNB - 2.50%
* Riksbank - 4.25%
Equity markets response positively to the announcement initially with FTSE 100 turned positive. However, European stock markets lacked follow through strength and turned south again. US stock indices are mixed in tight range.
In the forex markets, yen gives back earlier gains against most major currencies but in general, it's still holding in established tight range. Dollar also continues to consolidate against most major currencies. Aussie recovers after diving to as low as 0.6445 earlier today. However, note that key near term levels still holds. Dollar index retreats mildly but is still holding above 80 level. There is no change in the yen and dollar bullish outlook.
Earlier today, UK government announced a plan to invest about 50b pounds to prevent collapse of the UK banking system. The government will buy preference shares and BoE will make 200b or above available for banks to borrow under the special liquidity plan. UK government will also provide a guarantee of 250b pounds to help refinance debts. Tomorrow's BoE meeting is cancelled after today's rate cut.
On the data front, US pending home sales beat expectations by rising 7.4% mom in Aug. Canadian housing starts rose slightly from revised 217k to 218k in Aug. Germany industrial production rose 3.4% mom, 1.7% yoy in Aug. Eurozone Q2 GDP was finalized at -0.2% qoq, 1.4% yoy.
Suggested Readings:
* Global: Coordinated Central Bank Action
* Everyone Seems To Have Gotten The Message
* Coordinated Interest Rate Cuts - Too Little, Too Late?
* FOMC, ECB, BoE, SNB and BoC Cut Rates in Coordinated Effort
* There It Is: A Coordinated Rate Cut by Seven Monetary Authorities
* Fed, ECB, BoE, SNB, BOC and even PBOC Coordinate a Rate Cut - What Does it All Mean?
* Global Coordinated Rate Cut
* Coordinated Rate Cut From the Major Central Banks
GBP/JPY Mid-Day Outlook
Daily Pivots: (S1) 174.68; (P) 178.32; (R1) 180.71; More
GBP/JPY's break of 174.03 indicates fall from 197.42 has resumed. Further decline is now expected to next short term target of 100% projection of 215.87 to 184.47 from 197.42 at 166.02 first. On the upside, above 182.19 will indicate that a short term bottom might be in place and bring lengthier consolidation before resuming the medium term down trend.
In the bigger picture, 180 psychological support is taken out decisively. GBP/JPY is now pressing long term rising trend line support (129.32, 148.19). Sustained trading below will encourage fall to next medium term target of 100% projection of 251.09 to 192.60 from 215.87 at 157.38 and probably further to 148.19 low. On the upside, above 197.42 is needed to confirm that a medium term bottom is formed. Otherwise, outlook remains bearish.
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Global: Coordinated Central Bank Action
Daily Forex Fundamentals | Written by Danske Bank | Oct 08 08 14:18 GMT |
Overview: Today at 13:00 the Federal Reserve, the European Central Bank, Bank of England, the Swiss National Bank, Riksbanken in Sweden and Bank of Canada in a coordinated action cut key policy rates by 50bp. The People's Bank of China lowered the lending rate by 27bp. The Bank of Japan did not participate in the coordinated action but said it would stay in close contact with other central banks. The coordinated action is a strong signal that the central banks are now working together to fight the financial crisis and support the global economy. We expect further rate cuts from all participating central banks over the coming year as they work to fight the economic downturn. Should the crisis continue, we could see further coordinated action as the global authorities are committed to fight the crisis with all means.
Details: In a press comment the ECB argues for a coordinated rate cut by stating that "the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability. Some easing of global monetary conditions is therefore warranted". We expect the ECB to cut rates further from here as the economy continues to look weak. Furthermore inflation and inflation expectations are coming down. This gives the ECB room to manoeuvre. We are looking for the ECB to cut rates in December 2008 and again in February and April 2009, each time by 25bp, meaning that the ECB policy rate will be 3.00% by summer 2009.
The Federal Reserve delivered the rate cut indicated by Bernanke in his speech yesterday (see Flash Comment - FOMC: Positioning for rate cuts). The decision was unanimous and the FOMC statement made it clear that the rate cut was done as a reaction to a weaker growth outlook on the back of the intensification in the financial crisis. The FOMC stated that "the intensification of financial turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit" and the FOMC is now much less concerned by inflation pressures stating that "the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside to inflation". In our view the Fed remains on an easing bias. We expect a 25bp rate cut at the October 29 meeting and an additional 25bp cut at the December 16 meeting, taking the Fed funds rate to 1.00% by the end of 2008.
In UK the Bank of England stated that "during the past month, the balance of those risks to inflation in the medium term has shifted decisively to the downside". In the light of that outlook, the Committee judged at its October meeting that an immediate reduction in Bank Rate of 0.5 percentage points to 4.5% was necessary to meet the 2% target for CPI inflation in the medium term. With the economy weakening further and inflation coming down, we see the Bank of England continuing with a 25bp rate at each of the coming six meetings (November-April). This will take the Bank Rate to 3.0% - the same level that ECB is expected to reach.
The People's Bank of China (PBOC) today cut both the benchmark lending and deposit rates by 27bp to 6.93% and 3.87%, respectively. The reserve requirement was cut by 0.5ppt. PBOC will continue to cut its lending rate and reserve requirement. More importantly we expect PBOC to abolish bank credit quotas before year-end and possibly start to ease fiscal policy in 2009.
While Bank of Japan (BoJ) welcomed the coordinated effort to cut rate, it chose to remain on the sidelines and leave its leading O/N target rate unchanged at 0.5% using the usual BoJ argument that monetary policy is already very accommodative. In addition BoJ states that Japan's financial markets have been stable in comparison with those in other industrialised markets. BoJ's decision not to be part of the coordinated rate cuts confirm our view that BoJ will be on hold for the next year. Taking part in a coordinated rate cut was in our opinion the only real possibility for a rate cut in Japan in the short run and this door has now finally been closed. From a domestic viewpoint, cutting rates will not make much of a difference and the responsibility for stimulating the economy has increasingly been left to fiscal policy.
The 50bp rate cut from the Riksbank brought the Swedish repo rate down to 4.25%, which is the same level as in June. Apart from financial distress, the Riksbank rate cut was motivated by a significant deterioration in economic prospects for the economy and a waning inflation rate. The Riksbank's forecasts for inflation and growth will be revised downwards. The labour market is weakening and commodity prices have declined substantially. The next scheduled rate meeting will take place on October22, at which time we will also see the third Monetary Policy Report of the year with a new rate path forecast. It is worth reminding ourselves of the fact that in July the Riksbank laid out an alternative rate path in the event of lower inflation driven by commodity prices that saw the Swedish repo rate at 3.50% by Q1 09. Since then the inflation outlook seems even more subdued than in the low inflation scenario, and economic growth seems to be weaker. Consequently, we would not be surprised to see further rate cuts - perhaps as early as at the next meeting in two weeks' time.
The action comes just one day after the Danish Central Bank chose to raise the policy rate to defend the DKK. Following today's action the Danish Central Bank has stated that it will keep the interest rate unchanged for now. But we expect the Danish Central Bank to start narrowing the spread within the forthcoming weeks.
Norges Bank did not participate in the coordinated action but has moved its regular meeting forward by two weeks to October 15. Hence, it seems quite obvious that Norges Bank will follow suit and cut by 50bp at this meeting. Norges Bank said today that the financial crisis had spread rapidly across borders. It might be that Norges Bank was not asked today by the major central banks and that is the reason it did not take part.
Assessment & Outlook: The global central banks and governments are showing very strong commitment to fighting the global financial and economic crisis. The damage to the global economy is growing day by day and this was too much for the central banks to ignore. The fact that the rate cuts are coordinated is a strong signal as it shows that the global leaders are working together to fight this crisis. We believe global authorities will continue to work together in fighting this crisis and do whatever is necessary to turn the financial crisis. Equity markets responded positively with European markets rising 4%; bond yields also rose as money flew from bonds into risky assets.
Danske Bank
http://www.danskebank.com/danskeresearch
Disclaimer
This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets´ research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
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Overview: Today at 13:00 the Federal Reserve, the European Central Bank, Bank of England, the Swiss National Bank, Riksbanken in Sweden and Bank of Canada in a coordinated action cut key policy rates by 50bp. The People's Bank of China lowered the lending rate by 27bp. The Bank of Japan did not participate in the coordinated action but said it would stay in close contact with other central banks. The coordinated action is a strong signal that the central banks are now working together to fight the financial crisis and support the global economy. We expect further rate cuts from all participating central banks over the coming year as they work to fight the economic downturn. Should the crisis continue, we could see further coordinated action as the global authorities are committed to fight the crisis with all means.
Details: In a press comment the ECB argues for a coordinated rate cut by stating that "the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability. Some easing of global monetary conditions is therefore warranted". We expect the ECB to cut rates further from here as the economy continues to look weak. Furthermore inflation and inflation expectations are coming down. This gives the ECB room to manoeuvre. We are looking for the ECB to cut rates in December 2008 and again in February and April 2009, each time by 25bp, meaning that the ECB policy rate will be 3.00% by summer 2009.
The Federal Reserve delivered the rate cut indicated by Bernanke in his speech yesterday (see Flash Comment - FOMC: Positioning for rate cuts). The decision was unanimous and the FOMC statement made it clear that the rate cut was done as a reaction to a weaker growth outlook on the back of the intensification in the financial crisis. The FOMC stated that "the intensification of financial turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit" and the FOMC is now much less concerned by inflation pressures stating that "the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside to inflation". In our view the Fed remains on an easing bias. We expect a 25bp rate cut at the October 29 meeting and an additional 25bp cut at the December 16 meeting, taking the Fed funds rate to 1.00% by the end of 2008.
In UK the Bank of England stated that "during the past month, the balance of those risks to inflation in the medium term has shifted decisively to the downside". In the light of that outlook, the Committee judged at its October meeting that an immediate reduction in Bank Rate of 0.5 percentage points to 4.5% was necessary to meet the 2% target for CPI inflation in the medium term. With the economy weakening further and inflation coming down, we see the Bank of England continuing with a 25bp rate at each of the coming six meetings (November-April). This will take the Bank Rate to 3.0% - the same level that ECB is expected to reach.
The People's Bank of China (PBOC) today cut both the benchmark lending and deposit rates by 27bp to 6.93% and 3.87%, respectively. The reserve requirement was cut by 0.5ppt. PBOC will continue to cut its lending rate and reserve requirement. More importantly we expect PBOC to abolish bank credit quotas before year-end and possibly start to ease fiscal policy in 2009.
While Bank of Japan (BoJ) welcomed the coordinated effort to cut rate, it chose to remain on the sidelines and leave its leading O/N target rate unchanged at 0.5% using the usual BoJ argument that monetary policy is already very accommodative. In addition BoJ states that Japan's financial markets have been stable in comparison with those in other industrialised markets. BoJ's decision not to be part of the coordinated rate cuts confirm our view that BoJ will be on hold for the next year. Taking part in a coordinated rate cut was in our opinion the only real possibility for a rate cut in Japan in the short run and this door has now finally been closed. From a domestic viewpoint, cutting rates will not make much of a difference and the responsibility for stimulating the economy has increasingly been left to fiscal policy.
The 50bp rate cut from the Riksbank brought the Swedish repo rate down to 4.25%, which is the same level as in June. Apart from financial distress, the Riksbank rate cut was motivated by a significant deterioration in economic prospects for the economy and a waning inflation rate. The Riksbank's forecasts for inflation and growth will be revised downwards. The labour market is weakening and commodity prices have declined substantially. The next scheduled rate meeting will take place on October22, at which time we will also see the third Monetary Policy Report of the year with a new rate path forecast. It is worth reminding ourselves of the fact that in July the Riksbank laid out an alternative rate path in the event of lower inflation driven by commodity prices that saw the Swedish repo rate at 3.50% by Q1 09. Since then the inflation outlook seems even more subdued than in the low inflation scenario, and economic growth seems to be weaker. Consequently, we would not be surprised to see further rate cuts - perhaps as early as at the next meeting in two weeks' time.
The action comes just one day after the Danish Central Bank chose to raise the policy rate to defend the DKK. Following today's action the Danish Central Bank has stated that it will keep the interest rate unchanged for now. But we expect the Danish Central Bank to start narrowing the spread within the forthcoming weeks.
Norges Bank did not participate in the coordinated action but has moved its regular meeting forward by two weeks to October 15. Hence, it seems quite obvious that Norges Bank will follow suit and cut by 50bp at this meeting. Norges Bank said today that the financial crisis had spread rapidly across borders. It might be that Norges Bank was not asked today by the major central banks and that is the reason it did not take part.
Assessment & Outlook: The global central banks and governments are showing very strong commitment to fighting the global financial and economic crisis. The damage to the global economy is growing day by day and this was too much for the central banks to ignore. The fact that the rate cuts are coordinated is a strong signal as it shows that the global leaders are working together to fight this crisis. We believe global authorities will continue to work together in fighting this crisis and do whatever is necessary to turn the financial crisis. Equity markets responded positively with European markets rising 4%; bond yields also rose as money flew from bonds into risky assets.
Danske Bank
http://www.danskebank.com/danskeresearch
Disclaimer
This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets´ research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
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U.S. Fed's Target Federal Funds Interest Rate History (Table)
By Alex Tanzi
Oct. 8 (Bloomberg) -- The following table details the monetary actions of the Federal Reserve's Open Market Committee
The FOMC vote column refers to the votes for and against the interest rate decision. For more details on dissenting votes, see the bottom of the table. The Fed releases the vote count with the interest rate decision. The dissension details come from the published minutes of the FOMC meetings, which are released the day after the following meeting date.
Dissension Details: 06/25/08 Mr. Fisher dissented because he preferred an increase in the target federal funds rate at this meeting. While the financial system was still frail and downside risks to growth remained, the risk that inflation would fail to moderate as expected by the Committee had increased substantially over the intermeeting period. Relatively strong demand for oil and other commodities abroad, as well as increased labor and other operating costs in the emerging economies, was boosting prices of globally traded goods and services. Mr. Fisher was especially concerned about behavioral changes among business operators that appeared to be accommodating inflationary pressures. In particular, firms increasingly appeared to be planning to pass through their higher input costs to final goods prices in order to protect their profit margins. Overall, Mr. Fisher viewed inflation expectations as becoming less well anchored. To help restrain inflation expectations and inflation, Mr. Fisher felt it would be appropriate for the Committee to tighten the stance of monetary policy.
04/30/08 Messrs. Fisher and Plosser dissented because they preferred no change in the target federal funds rate at this meeting. Although the economy had been weak, it had evolved roughly as expected since the previous meeting. Stresses in financial markets also had continued, but the Federal Reserve's liquidity facilities were helpful in that regard and the more worrisome development in their view was the outlook for inflation. Rising prices for prices, energy, and other commodities; signs of higher inflation expectations; and a negative real federal funds rate raised substantial concerns about the prospects for inflation. Mr. Plosser cited the recent rapid growth of monetary aggregates as additional evidence that the economy had ample liquidity after the aggressive easing of policy to date. Mr. Fisher was concerned that an adverse feedbank loop was developing by which lowering the funds rate had been pushing down the exchange value of the dollar, contributing to higher commodity and import prices, cutting real spending by businesses and households, and therefore ultimately impairing economic activity. To help prevent inflation expectations from becoming unhinged, both Messrs. Fisher and Plosser felt the Committee should put additional emphasis on its price stability goal at this point, and they believed that another reduction in the funds rate at this meeting could prove costly over the longer run.
run.
03/18/08 Messrs. Fisher and Plosser dissented because, in light of heightened inflation risks, they favored easing policy less aggressively. Incoming data suggested a weaker near-term outlook for economic growth, but the Committee's earlier policy moves had already reduced the target federal funds rate by 225 basis points to address risks to growth, and the full effect of those rate cuts had yet to be felt. While financial markets remained under stress, the Federal Reserve had already taken separate, significant actions to address liquidity issues in markets. In fact, Mr. Fisher felt that focusing on measures targeted at relieving liquidity strains would improve economic prospects more quickly and lastingly than would further reductions in the federal funds rate at this point; he believed that alleviating these strains would increase the efficacy of the earlier rate cuts. Both Messrs. Fisher and Plosser were concerned that inflation expectations could potentially become unhinged should the Committee continue to lower the funds rate in the current environment. They pointed to measures of inflation and indicators of inflation expectations that had risen, and Mr. Fisher stressed the international influences on U.S. inflation rates. Mr. Plosser noted that the Committee could not afford to wait until there was clear evidence that inflation expectations were no longer anchored, as by then it would be too late to prevent a further increase in inflation pressures.
01/30/08 Voting against was Richard W. Fisher, who preferred no change in the target for the federal funds rate at this meeting.
01/22/08 Voting against was William Poole, who did not believe that current conditions justified policy action before the regularly scheduled meeting next week. Absent and not voting was Frederic S. Mishkin.
10/31/07 Mr. Hoenig dissented because he believed that policy should remain unchanged at this meeting. Projections for the U.S. and global economies suggested that growth was likely to proceed at a reasonable pace over the outlook period. To better assure that outcome, the FOMC had moved rates down significantly at its September meeting. At this meeting, inflation risks appeared elevated and Mr. Hoenig felt that the target federal funds rate was currently close to neutral. In these circumstances, he judged that policy needed to be slightly firm to better hold inflation in check. Going forward, if the data suggested the Committee needed to ease further, it could do so. He also recognized that liquidity remains a near-term challenge and that the Federal Reserve would be prepared to act if needed. Mr. Hoenig saw the risks to both economic growth and inflation to be elevated and preferred to wait, watch, and be ready to depending on how events developed.
12/12/06 Mr. Lacker dissented because he believed that further tightening was needed to help ensure that core inflation declines to an acceptable rate in coming quarters.
10/25/06 Mr. Lacker dissented because he believed that further tightening was needed to help ensure that core inflation declines to an acceptable rate in coming quarters.
09/20/06 Mr. Lacker dissented because he believed that further tightening was needed to bring inflation down more rapidly than would be the case if the policy rate were kept unchanged. Recent data indicated that inflation remained above levels consistent with price stability. Moreover, the upswing in compensation and unit labor costs in the first half of the year indicated that inflation risks were tilted to the upside. Although real growth was likely to be moderate in coming quarters, in his view it was unlikely to be slow enough to bring core inflation down.
08/08/06 Jeffery Lacker dissented because he preferred an increase of 25 basis points in the federal funds rate target at this meeting.
09/20/05 Mr. Olson dissented because he preferred that the Committee defer policy action at this meeting, pending the receipt of additional information on the economic effects resulting from the severe shock of Hurricane Katrina.
06/25/03 Voting against the action was Robert T. Parry. President Parry preferred a 50 basis point reduction in the target for the federal funds rate.
09/24/02 Messrs. Gramlich and McTeer dissented because they preferred to ease monetary policy at this meeting. The economic expansion, which resumed almost a year ago, had recently lost momentum, and job growth had been minimal over the past year. With inflation already low and likely to decline further in the face of economic slack and rapid productivity growth, the potential cost of additional stimulus seemed low compared with the risk of further weakness.
12/11/01 Mr. Hoenig dissented because he preferred to leave the federal funds rate unchanged. He judged that a 2 percent federal funds rate was already quite stimulative and that a more stimulative policy was not needed. Following the rapid and aggressive policy actions already taken, it would be prudent to give the current policy more time to work through the economy. It was also his position that reducing the federal funds rate at this meeting could increase interest rate volatility by creating an expectation of a faster or a more aggressive reversal of policy.
06/27/01 Mr. Poole dissented because he believed the FOMC actions this year had already established a highly stimulative monetary policy stance. The M2 and MZM measures of money had risen at annual rates in excess of 10 percent and 20 percent respectively over the past six months, and the real federal funds rate was very likely below its equilibrium level. Other more qualitative information on financial conditions pointed in the same direction. Economic forecasts were that the economy's growth would resume later this year and the fact that long-term interest rates had not declined since December also indicated that the market anticipated a revival of faster economic growth before long. Given the lags in monetary processes, he believed that adding further monetary policy stimulus raised an undue risk of fostering higher inflation in the future. Moreover, against this background, he was especially concerned that a statement that the Committee continued to view the balance of risks as weighted toward weakness would be read in the market as a sign that the Committee was likely to ease further in the near term. He thought future developments were equally likely to warrant an action in either direction, and he did not think the Committee should take a step that probably would cause expectations of further easing to become embedded in market interest rates.
05/15/01 Mr. Hoenig dissented because he preferred a less aggressive easing action involving a reduction of 25 basis points in the federal funds rate. While the risks of weaker economic growth still tended to dominate those of rising inflation and called for some further easing, the Committee had added significant liquidity to the economy this year through its cumulatively large easing actions. The lagged effects of those actions should be felt increasingly over time. Moreover, following the rapid and aggressive policy actions already taken, a more cautious policy move at this point would in his view appropriately limit the risks of producing an overly accommodative policy stance and rising inflation over time.
08/24/99 Mr. McTeer dissented for essentially the same reasons he did at the June 30 meeting: low inflation and, except for energy, minimal inflation in the pipeline. He believes that positive supply-side forces will continue to damp the impact of strong demand on output prices and that productivity gains will continue to damp the effect of higher wages on unit labor costs.
06/30/99 Mr. McTeer dissented because he believed that tightening was unnecessary to contain inflation. He noted that most measures of current inflation remain low, and he saw few signs of inflation in the pipeline. Conditions that called for a preemptive tightening in 1994--rapidly rising commodity prices and real short-term interest rates near zero--are not present today. While money growth has been rapid by historical standards, market-based indicators of monetary policy suggest sufficient restraint. Except for oil, most sensitive commodity prices have risen only slightly after years of decline, the dollar remains strong, real short-term interest rates are near historical norms, and productivity growth has accelerated in recent quarters. Mr. McTeer does not believe that rapid growth based on new technology, rising productivity, and other supply-side factors is inflationary, especially in the current global environment. He would have preferred to continue to test the growth limits of the new economy.
11/17/98 Mr. Jordan dissented because he believed that the two recent reductions in the Federal funds rate were sufficient responses to the stresses in financial markets that had emerged suddenly in late August. An additional rate reduction risked fueling an unsustainably strong growth rate of domestic demand. He expressed concern that the excessively rapid rates of growth of the monetary and credit aggregates were inconsistent with continued low inflation. Moreover, any further monetary expansion in response to economic weakness abroad could ultimately have a disrupting influence on domestic prosperity if policy were forced to reverse course at a later date to defend the purchasing power of the dollar.
08/18/98 Mr. Jordan dissented because he believed that the underlying strength of aggregate demand in the U.S. economy would remain fundamentally intact, despite economic problems abroad. The problems in Asia provide a channel for economic imbalances to develop. Exports from some U.S. manufacturing industries will decline due to softer foreign markets and import competition. At the same time, domestic demand for imports, housing, and consumer durables will increase due to favorable interest rate trends. Though U.S. production of goods and services might slow during the period ahead, it is not yet clear that total demand will diminish at a comparable pace. At the same time, ample credit provision encourages speculative lending and excessive consumption. Consequently, continued rapid growth in the money supply creates the risk that inflation will accelerate and economic imbalances will become protracted.
07/01/98 Mr. Jordan dissented because he believed that the unsustainably rapid growth of domestic demand--fueled by the acceleration of money and credit growth in the past year--was reflected in the recent sharp increase in imports and rising trade deficits. As U.S. output growth slows significantly from the rapid pace of 1997 and early 1998, it will be essential that domestic demand also slow. The very welcome progress toward eliminating inflation in recent years has contributed to the outstanding performance of the economy. Allowing domestic demand to continue to exceed domestic production would run the risk that corrosive effects of rising inflation would undermine future growth prospects. Furthermore, the resultant trade and current account deficits would have to be matched by ever larger inflows of foreign capital. Modest monetary restraint at this time might prevent either the buildup of inflationary imbalances that would eventually necessitate future policy restraint or unsustainable capital flows. In either case an economic contraction might become unavoidable.
05/19/98 Mr. Poole dissented because he believed that the sustained increase in money growth in recent quarters and associated accommodative conditions in the credit markets pointed to rising inflation. Although faster productivity growth suggested that trend output growth might be modestly higher than previously thought, the growth rate of aggregate demand over the past two years clearly had exceeded the economy's long-run growth potential. Without a reduction of aggregate demand growth, inflation would rise. In his view, the Federal Reserve should therefore take prompt action to reduce money growth to limit the rise in inflation and to avoid an increase in longer-term inflation expectations, which would tend to destabilize aggregate employment and financial markets.
Mr. Jordan also noted that the monetary and credit aggregates had accelerated further from already rapid growth rates in 1997. In his view, these high growth rates were fueling unsustainably rapid increases of real estate and other asset prices, and reports of ``too much cash chasing too few deals'' were becoming more frequent. Anticipated gains on both real and financial investments had risen relative to the cost of borrowed funds. In these circumstances, it was increasingly likely that the Committee would face a choice between smaller increases in interest rates sooner versus larger increases later. He added that maximum sustainable economic growth occurs when businesses and households act on the assumption that the dollar will maintain its value over time, and nothing he had heard from consumer groups, bankers, or other business people in his District led him to believe that decisions were being made in the expectation that the purchasing power of the dollar would be stable. Furthermore, expectations that market values of income- producing investments would continuously rise relative to underlying earning streams were not consistent with a stable purchasing power of money. He also believed that the view that real interest rates currently were high was not confirmed by observed behavior. Bankers told him that both consumers and businesses believed that credit was cheap and plentiful. These potentially inflationary conditions and imbalances in the economy were not conducive to sustained maximum growth.
03/31/98 Mr. Jordan dissented because growth rates of various measures of money and credit in the second half of 1997 and the first quarter of this year were not consistent in his view with continued progress in reducing inflation. Recent price statistics understated the trend rates of inflation. The one-time effects of falling oil prices, lower food prices, and recent appreciation of the dollar on foreign-exchange markets provided only a temporary reduction of inflation. While some reacceleration of reported rates of inflation was probably unavoidable, sustained rapid money growth would risk even higher inflation in future years. The durability of the economic expansion would be jeopardized by price and wage decisions reflecting expectations that the purchasing power of the dollar would decline at faster rates in the future. Once such expectations became imbedded in the economy, even stronger policy actions would be required in order to reestablish a downward trend of inflation.
12/16/97 Mr. Broaddus dissented because he continued to believe that a modest tightening of policy would be prudent in light of the apparent persisting strength in aggregate demand for goods and services. He recognized the case for holding policy steady given recent developments in East Asian economies and financial markets; he believed, however, that a slight firming at this meeting would provide valuable insurance against the risk that demand growth might remain above a sustainable trend and require a sharper policy response later. He thought further that the potential benefits of this insurance outweighed the risk that such an action would have a significant negative impact on U.S. economic activity. He also believed that signaling a greater willingness to tolerate modest policy adjustments in response to emerging developments would foster more flexible movements in longer-term financial markets, and specifically enable longer- term interest rates to play their traditional role as automatic stabilizers for the economy more effectively.
11/12/97 Mr. Broaddus dissented because he believed that a modest tightening of policy would be prudent in view of the recent strength in aggregate demand for goods and services; such demand appeared to be growing considerably more rapidly than the sustainable rate at which it could be supplied without an increase in inflation. While he recognized that a tightening at this meeting presented risks in view of recent financial and economic developments in East Asia, he believed these risks were outweighed by the risk that policy would have to be tightened more aggressively if action were delayed, demand remained robust, and the recent apparent reduction in inflationary expectations were reversed. The negative impact on economic activity in such circumstances would be markedly greater than if a more modest action were taken at this meeting.
05/20/97 Mr. Broaddus dissented because he believed that the strength of investment demand, due possibly to an increase in the trend growth rate of productivity, required somewhat higher real interest rates to prevent inflationary pressures from developing. He was concerned that, with the economy already operating at a high level and labor markets apparently very tight, any increase in such pressures might be costly to reverse and might reduce the credibility of the Committee's longer-run strategy of promoting maximum sustainable growth by fostering price level stability. He also believed that the risk to the economy of a moderate further tightening was small given the apparent momentum of aggregate economic activity.
09/24/96 Mr. Stern dissented because he believed that a modestly more restrictive policy was appropriate. In his view, historical precedents suggested that prolonged periods of taut labor markets were eventually associated with rising inflation. Given prevailing pressures on resources, especially labor, Mr. Stern was concerned about the distinct risk of an acceleration of inflation. Should this acceleration occur, he believed it would prove disruptive to the favorable performance of the economy, and he preferred to begin to address this risk promptly.
08/20/96 Mr. Stern dissented because he believed that policy should become modestly more restrictive. He was concerned that, in the absence of a substantial and sustained improvement in productivity, the prevailing pattern of demand might engender an increase in inflationary pressures, and that such pressures would ultimately threaten the ongoing economic expansion. In Mr. Stern's judgment, it was prudent at this point to resist such a development in order to lay a foundation for the long-term health of the economy.
07/03/96 Mr. Stern dissented because he was convinced that a modestly more restrictive policy was warranted. In his view, the momentum of the economy and strains on capacity in labor and some other markets raised the possibility of an acceleration of inflation that would jeopardize the economic expansion. This concern aside, Mr. Stern also believed that current circumstances were favorable for policy action to reduce inflation further and thereby help to sustain the ongoing improvement in the economy.
11/15/95 Mr. Lindsey dissented because he believed a rate cut was necessary due to high consumer debt levels and uncertainty as to when the federal budget impasse would end.
07/06/95 Mr. Hoenig dissented because he believed that it would be prudent to adopt an asymmetric directive and wait for information rather than to move at this juncture based on the projections and the evidence that we have about the real fed funds rate.
12/20/94 Governor LaWare dissented.
11/15/94 President Broaddus dissented.
09/27/94 President Broaddus dissented.
07/06/94 President Broaddus and Governor Lindsey dissented. At the end of this meeting, Mr. Lindsey indicated to Chairman Greenspan that his dissent on the operational paragraph was based on a possible misunderstanding of the implications of the bias in the directive. His dissent was from a directive that he perceived as calling for a more or less automatic tightening of policy during the intermeeting period. On the understanding that any tightening during the intermeeting period would depend on further indications of inflationary developments, Mr. Lindsey requested that his vote be recorded in the minutes as in favor of this policy action. Chairman Greenspan agreed that his request was appropriate.
03/22/94 President Broaddus and President Jordan dissented.
12/21/93 Governor Angell and Governor Lindsey dissented.
06/07/93 Governor Angell dissented.
05/18/93 Governor Angell and President Boehne dissented.
03/23/93 Governor Angell and Governor Lindsey dissented.
11/17/92 President Jordan, Governor LaWare and President Melzer dissented.
10/06/92 President Jordan, Governor LaWare, Governor Lindsey and President Melzer dissented.
08/18/92 Governor LaWare and President Melzer dissented.
07/01/92 Governor LaWare and President Melzer dissented.
12/17/91 Governor LaWare dissented.
11/05/91 Governor Angell and Governor Kelley dissented.
10/02/90 Governor Angell, President Boykin, Presdient Hoskins and Governor Seger dissented.
05/15/90 President Hoskins dissented.
03/27/90 Governor Angell, President Hoskins, and Governor LaWare dissented.
02/07/90 President Boykin, Presdient Hoskins and Governor Seger dissented.
12/19/89 Governor Angell and President Melzer dissented.
07/06/89 Governor Seger dissented.
To contact the reporter on this story: Alex Tanzi in Washington at atanzi@bloomberg.net
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Oct. 8 (Bloomberg) -- The following table details the monetary actions of the Federal Reserve's Open Market Committee
The FOMC vote column refers to the votes for and against the interest rate decision. For more details on dissenting votes, see the bottom of the table. The Fed releases the vote count with the interest rate decision. The dissension details come from the published minutes of the FOMC meetings, which are released the day after the following meeting date.
============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 10/08/08 1.50% -Fed cuts the rate to 1.50% in an unscheduled meeting- 09/16/08 2.00% None 0.00% 2.25% Inflation/Growth Risk10-0
Downside risks to growth; upside risk to inflation 08/05/08 2.00% None 0.00% 2.25% Inflation/Growth Risk10-1
Downside risks to growth; upside risk to inflation 06/25/08 2.00% None 0.00% 2.25% Inflation Risk 9-1 ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================
Diminished downside growth risk; upside risk to inflation 04/30/08 2.00% Easing -0.25% 2.25% Assessment Omitted 8-2
Economic activity remains weak, inflation uncertainty remains high 03/18/08 2.25% Easing -0.75% 2.50% Downside Growth Risk 8-2
Economic activity has weaken further, Inflation has been elevated. 03/16/08 -Fed cuts the discount rate to 3.25% in an unscheduled meeting-
and extends discount window loan terms to 90 days from 30 days. 01/30/08 3.00% Easing -0.50% 3.50% Downside Growth 9-1
Inflation expected to moderate in coming quarters. 01/22/08 3.50% Easing -0.75% 4.00% Inter-meeting 8-1 12/11/07 4.25% Easing -0.25% 4.75% Assessment Omitted 9-1
Growth moderate over time, inflation risks remain. 10/31/07 4.50% Easing -0.25% 5.00% Balanced 9-1
Growth will likely slow, inflation risks remain. 09/18/07 4.75% Easing -0.50% 5.25% Assessment Omitted 10-0
Potentially restrained growth, inflation risks remain. 08/17/07 -Fed cuts the discount rate to 5.75% in an unscheduled meeting- ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================
-and changes economic assessment to downside risks to growth- 08/07/07 5.25% None None 6.25% Inflation risk 10-0
Growth likely moderate, no moderation in inflation pressures. 06/28/07 5.25% None None 6.25% Inflation risk 10-0
Growth likely moderate, no moderation in inflation pressures. 05/09/07 5.25% None None 6.25% Inflation risk 10-0
Growth likely moderate, inflation likely to moderate. 03/21/07 5.25% None None 6.25% Inflation risk 10-0
Growth likely moderate, inflation likely to moderate. 01/31/07 5.25% None None 6.25% Inflation risk 11-0
Growth likely moderate, inflation likely to moderate.
12/12/06 5.25% None None 6.25% Inflation risk 10-1 10/25/06 5.25% None None 6.25% Inflation risk 10-1 09/20/06 5.25% None None 6.25% Inflation risk 10-1 08/08/06 5.25% None None 6.25% Inflation risk 9-1 06/29/06 5.25% Tightening 0.25% 6.25% Inflation risk 10-0 ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 05/10/06 5.00% Tightening 0.25% 6.00% Inflation risk 11-0 03/28/06 4.75% Tightening 0.25% 5.75% Balanced 11-0
-Bernanke assumes chairman's position on Feb. 1, 2006- 01/31/06 4.50% Tightening 0.25% 5.50% Balanced 10-0 12/13/05 4.25% Tightening 0.25% 5.25% Balanced 10-0 11/01/05 4.00% Tightening 0.25% 5.00% Balanced 10-0 09/20/05 3.75% Tightening 0.25% 4.75% Balanced 9-1 08/09/05 3.50% Tightening 0.25% 4.50% Balanced 10-0 06/30/05 3.25% Tightening 0.25% 4.25% Balanced 11-0 05/03/05 3.00% Tightening 0.25% 4.00% Balanced 11-0 03/22/05 2.75% Tightening 0.25% 3.75% Balanced 12-0 02/02/05 2.50% Tightening 0.25% 3.50% Balanced 12-0
12/14/04 2.25% Tightening 0.25% 3.25% Balanced 12-0 11/10/04 2.00% Tightening 0.25% 3.00% Balanced 12-0 09/21/04 1.75% Tightening 0.25% 2.75% Balanced 12-0 08/10/04 1.50% Tightening 0.25% 2.50% Balanced 12-0 ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 06/30/04 1.25% Tightening 0.25% 2.25% Balanced 12-0 05/04/04 1.00% None None 2.00% Balanced 12-0 03/16/04 1.00% None None 2.00% Balanced 12-0 01/28/04 1.00% None None 2.00% Balanced 12-0
12/09/03 1.00% None None 2.00% Balanced 12-0 10/28/03 1.00% None None 2.00% Balanced w/ 12-0
risk of
disinflation
09/16/03 1.00% None None 2.00% Balanced w/ 12-0
risk of
disinflation 08/12/03 1.00% None None 2.00% Balanced w/ 12-0
risk of
disinflation 06/25/03 1.00% Easing -0.25% 2.00% Balanced w/ 11-1 ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================
risk of
deflation 05/06/03 1.25% None None 2.25% Balanced w/ 12-0
risk of
deflation 03/18/03 1.25% None None 2.25% None 12-0 01/29/03 1.25% None None 2.25% Balanced 12-0
-(*)Primary Credit Rate Replaces Discount Rate Jan. 9, 2003-
12/10/02 1.25% None None 0.75% Balanced 12-0 11/06/02 1.25% Easing -0.50% 0.75% Balanced 12-0 09/24/02 1.75% None None 1.25% Weakness 10-2 08/13/02 1.75% None None 1.25% Weakness 12-0 06/26/02 1.75% None None 1.25% Balanced 10-0 05/07/02 1.75% None None 1.25% Balanced 10-0 03/19/02 1.75% None None 1.25% Balanced 10-0 01/30/02 1.75% None None 1.25% Weakness 10-0 ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================
12/11/01 1.75% Easing -0.25% 1.25% Weakness 10-1 11/06/01 2.00% Easing -0.50% 1.50% Weakness 10-0 10/02/01 2.50% Easing -0.50% 2.00% Weakness 10-0 09/17/01 3.00% Easing -0.50% 2.50% Inter-meeting 10-0 08/21/01 3.50% Easing -0.25% 3.00% Weakness 8-0 06/27/01 3.75% Easing -0.25% 3.25% Weakness 9-1 05/15/01 4.00% Easing -0.50% 3.50% Weakness 9-1 04/18/01 4.50% Easing -0.50% 4.00% Inter-meeting 10-0 03/20/01 5.00% Easing -0.50% 4.50% Weakness 10-0 01/31/01 5.50% Easing -0.50% 5.00% Weakness 10-0 01/03/01 6.00% Easing -0.50% 5.50% Inter-meeting 10-0
12/19/00 6.50% None None 6.00% Weakness 10-0 11/15/00 6.50% None None 6.00% Inflation 10-0 10/03/00 6.50% None None 6.00% Inflation 10-0 08/22/00 6.50% None None 6.00% Inflation 10-0 ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 06/28/00 6.50% None None 6.00% Inflation 10-0 05/16/00 6.50% Tightening 0.50% 6.00% Inflation 10-0 03/21/00 6.00% Tightening 0.25% 5.50% Inflation 10-0 02/02/00 5.75% Tightening 0.25% 5.25% Inflation 10-0
12/21/99 5.50% None None 5.00% Neutral 10-0 11/16/99 5.50% Tightening 0.25% 5.00% Neutral 10-0 10/05/99 5.25% None None 4.75% Tightening 10-0 08/24/99 5.25% Tightening 0.25% 4.75% Neutral 9-1 06/30/99 5.00% Tightening 0.25% 4.50% Neutral 9-1 05/18/99 4.75% None None 4.50% Tightening 11-0 03/30/99 4.75% None None 4.50% Neutral 11-0 02/03/99 4.75% None None 4.50% Neutral 11-0
12/22/98 4.75% None None 4.50% Neutral 11-0 11/17/98 4.75% Easing -0.25% 4.50% Neutral 10-1 10/15/98 5.00% Easing -0.25% 4.75% Inter-meeting n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 09/29/98 5.25% Easing -0.25% 5.00% Easing 11-0 08/18/98 5.50% None None 5.00% Neutral 10-1 07/01/98 5.50% None None 5.00% Tightening 10-1 05/19/98 5.50% None None 5.00% Tightening 10-2 03/31/98 5.50% None None 5.00% Tightening 11-1 02/04/98 5.50% None None 5.00% Neutral 12-0
12/16/97 5.50% None None 5.00% Neutral 11-1 11/12/97 5.50% None None 5.00% Tightening 11-1 09/30/97 5.50% None None 5.00% Tightening 10-0 08/19/97 5.50% None None 5.00% Tightening 10-0 07/02/97 5.50% None None 5.00% Tightening 10-0 05/20/97 5.50% None None 5.00% Tightening 9-1 03/25/97 5.50% Tightening 0.25% 5.00% Neutral 10-0 02/05/97 5.25% None None 5.00% Tightening 10-0
12/17/96 5.25% None None 5.00% Tightening 12-0 ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 11/13/96 5.25% None None 5.00% Tightening 12-0 09/24/96 5.25% None None 5.00% Tightening 11-1 08/20/96 5.25% None None 5.00% Tightening 11-1 07/03/96 5.25% None None 5.00% Tightening 11-1 05/21/96 5.25% None None 5.00% Neutral 10-0 03/26/96 5.25% None None 5.00% Neutral 10-0 01/31/96 5.25% Easing -0.25% 5.00% Easing 10-0
12/19/95 5.50% Easing -0.25% 5.25% Neutral 11-0 11/15/95 5.75% None None 5.25% Neutral 10-1 09/26/95 5.75% None None 5.25% Neutral 11-0 08/22/95 5.75% None None 5.25% Neutral 11-0 07/06/95 5.75% Easing -0.25% 5.25% Easing 10-1 05/23/95 6.00% None None 5.25% Neutral 11-0 03/28/95 6.00% None None 5.25% Tightening 11-0 02/01/95 6.00% Tightening 0.50% 5.25% Neutral 12-0
============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 12/20/94 5.50% None None 4.75% Tightening 11-1 11/15/94 5.50% Tightening 0.75% 4.75% Neutral 12-0 09/27/94 4.75% None None 4.00% Tightening 11-1 08/16/94 4.75% Tightening 0.50% 4.00% Neutral 12-0 07/06/94 4.25% None None 3.50% Tightening 9-2* 05/17/94 4.25% Tightening 0.50% 3.50% Neutral 10-0 04/18/94 3.75% Tightening 0.25% 3.00% Inter-meeting n/a 03/22/94 3.50% Tightening 0.25% 3.00% Neutral 8-2 02/04/94 3.25% Tightening 0.25% 3.00% Neutral 10-0
12/21/93 3.00% None None 3.00% Neutral 10-2 11/16/93 3.00% None None 3.00% Neutral 12-0 09/23/93 3.00% None None 3.00% Neutral 12-0 08/17/93 3.00% None None 3.00% Neutral 12-0 07/07/93 3.00% None None 3.00% Tightening 11-1 05/18/93 3.00% None None 3.00% Tightening 10-2 03/23/93 3.00% None None 3.00% Neutral 10-2 ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 02/03/93 3.00% None None 3.00% Neutral 12-0
12/22/92 3.00% None None 3.00% Neutral 12-0 11/17/92 3.00% None None 3.00% Easing 9-3 10/06/92 3.00% None None 3.00% Easing 8-4 09/04/92 3.00% Easing -0.25% 3.00% Inter-meeting n/a 08/18/92 3.25% None None 3.00% Easing 10-2 07/02/92 3.25% Easing -0.50% 3.00% Easing 10-2 05/19/92 3.75% None None 3.50% Neutral 12-0 04/09/92 3.75% Easing -0.25% 3.50% Inter-meeting n/a 03/31/92 4.00% None None 3.50% Easing 12-0 02/05/92 4.00% None None 3.50% Easing 12-0
12/20/91 4.00% Easing -0.50% 3.50% Easing 11-1 12/06/91 4.50% Easing -0.25% 4.50% Inter-meeting n/a 11/06/91 4.75% Easing -0.25% 4.50% Easing 8-2 10/31/91 5.00% Easing -0.25% 5.00% Inter-meeting n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 10/01/91 5.25% None None 5.00% Easing 10-0 09/13/91 5.25% Easing -0.25% 5.00% Inter-meeting n/a 08/20/91 5.50% None None 5.50% Easing 10-0 08/06/91 5.50% Easing -0.25% 5.50% Inter-meeting n/a 07/03/91 5.75% None None 5.50% Neutral 10-0 05/14/91 5.75% None None 5.50% Neutral 10-0 04/30/91 5.75% Easing -0.25% 5.50% Inter-meeting n/a 03/26/91 6.00% None None 6.00% Neutral 10-0 03/08/91 6.00% Easing -0.25% 6.00% Inter-meeting n/a 02/06/91 6.25% None None 6.00% Easing 11-0 02/01/91 6.25% Easing -0.50% 6.00% Inter-meeting n/a 01/08/91 6.75% Easing -0.25% 6.50% Inter-meeting n/a
12/18/90 7.00% Easing -0.25% 6.50% Easing 10-0 12/07/90 7.25% Easing -0.25% 7.00% Inter-meeting n/a 11/14/90 7.50% Easing -0.25% 7.00% Easing 11-0 10/29/90 7.75% Easing -0.25% 7.00% Inter-meeting n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 10/02/90 8.00% None None 7.00% Easing 7-4 08/21/90 8.00% None None 7.00% Easing 11-0 07/13/90 8.00% Easing -0.25% 7.00% Inter-meeting n/a 07/03/90 8.25% None None 7.00% Easing 11-0 05/15/90 8.25% None None 7.00% Neutral 10-1 03/27/90 8.25% None None 7.00% Neutral 8-3 02/07/90 8.25% None None 7.00% Neutral 8-3
12/19/89 8.25% Easing -0.25% 7.00% Neutral 9-2 11/14/89 8.50% None None 7.00% Easing 10-1 10/18/89 8.50% Easing -0.50% 7.00% Inter-meeting n/a 10/03/89 9.00% None None 7.00% Easing 9-2 08/22/89 9.00% None None 7.00% Easing 10-1 07/26/89 9.00% Easing -0.25% 7.00% Inter-meeting n/a 07/06/89 9.25% Easing -0.38% 7.00% Neutral 10-1 06/05/89 9.63% Easing -0.12% 7.00% Inter-meeting n/a 05/16/89 9.75% None None 7.00% Neutral 11-1 ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 03/28/89 9.75% None None 7.00% Tightening 11-1 02/24/89 9.75% Tightening 0.12% 7.00% Inter-meeting n/a 02/23/89 9.63% Tightening 0.25% 6.50% n/a n/a 02/14/89 9.38% Tightening 0.38% 6.50% Inter-meeting n/a 02/08/89 9.00% Tightening 0.25% 6.50% Tightening 10-2
12/14/88 8.75% Tightening 0.37% 6.50% Tightening 11-1 11/22/88 8.38% Tightening 0.13% 6.50% Inter-meeting n/a 11/01/88 8.25% None None 6.50% Tightening 11-1 10/17/88 8.25% None None 6.50% Inter-meeting n/a 09/20/88 8.25% None None 6.50% Tightening 12-0 08/09/88 8.25% Tightening 0.50% 6.50% Tightening 10-1 08/05/88 7.75% None None 6.00% n/a n/a 07/19/88 7.75% Tightening 0.25% 6.00% Inter-meeting n/a 06/30/88 7.50% None None 6.00% Tightening 8-3 06/22/88 7.50% Tightening 0.25% 6.00% Inter-meeting n/a 05/25/88 7.25% Tightening 0.25% 6.00% Inter-meeting n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 05/17/88 7.00% Tightening 0.25% 6.00% Tightening 9-2 03/29/88 6.75% Tightening 0.25% 6.00% Neutral n/a 02/10/88 6.50% Easing -0.13% 6.00% Neutral 11-0 01/05/88 6.63% Easing -0.25% 6.00% Inter-meeting n/a
12/16/87 6.88% None None 6.00% Neutral 9-2 11/04/87 6.88% Easing -0.37% 6.00% Easing 11-0
-No target rate from 10/19 to 11/3 due to stock market crash- 10/08/87 7.25% None None 6.00% Inter-meeting n/a 09/22/87 7.25% None None 6.00% Neutral 11-0 09/04/87 7.25% Tightening 0.25% 6.00% Inter-meeting n/a 09/03/87 7.00% Tightening 0.25% 5.50% Inter-meeting n/a 08/18/87 6.75% None None 5.50% Tightening 11-0
-Greenspan assumes chairman's position on Aug. 11, 1987- 07/07/87 6.75% None None 5.50% Neutral 11-0 07/02/87 6.75% None None 5.50% Inter-meeting n/a 05/19/87 6.75% Tightening 0.25% 5.50% Tightening 9-1 ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 04/29/87 6.50% Tightening 0.50% 5.50% Inter-meeting n/a 03/31/87 6.00% None None 5.50% Tightening 11-0 02/11/87 6.00% None None 5.50% Tightening 10-0
12/16/86 6.00% Tightening 0.12% 5.50% Neutral 10-0 11/05/86 5.88% None None 5.50% Neutral 10-0 09/23/86 5.88% None None 5.50% Tightening 11-1 08/19/86 5.88% Easing -0.50% 5.50% Neutral 10-2 07/11/86 6.38% Easing -0.50% 6.00% Neutral 10-1 06/05/86 6.88% None None 6.50% Inter-meeting n/a 05/20/86 6.88% Tightening 0.13% 6.50% Neutral 10-1 04/21/86 6.75% Easing -0.50% 6.50% Inter-meeting n/a 04/01/86 7.25% None None 7.00% Neutral 11-0 03/07/86 7.25% Easing -0.50% 7.00% n/a n/a 02/12/86 7.75% None None 7.50% Neutral 10-2
12/17/85 7.75% Easing -0.25% 7.50% Easing 9-1 ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 11/05/85 8.00% None None 7.50% Easing 9-1 10/01/85 8.00% None None 7.50% Neutral 10-1 08/20/85 8.00% Tightening 0.25% 7.50% Neutral 9-2 05/21/85 7.75% Easing -0.25% 7.50% Easing 11-1 04/16/85 8.25% Easing -0.25% 8.00% n/a n/a 03/29/85 8.50% Easing -0.50% 8.00% Neutral 11-0 02/13/85 9.00% Tightening 0.75% 8.00% Neutral 9-3
12/24/84 8.25% Easing -0.50% 8.00% n/a n/a 12/18/84 8.75% Easing -0.25% 8.50% n/a 10-2 11/22/84 9.00% Easing -0.50% 8.50% n/a n/a 11/07/84 9.50% Easing -0.50% 9.00% n/a 11-1 10/02/84 10.00% Easing -1.75% 9.00% n/a 9-3 08/21/84 11.75% Tightening 0.75% 9.00% n/a 11-1 06/30/84 11.00% Tightening 0.50% 9.00% n/a n/a 04/09/84 10.50% None None 9.00% n/a 10-1 03/27/84 10.50% Tightening 1.00% 8.50% n/a 9-3 ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================
8/83-10/83 9.50% Easing -0.13% 8.50% n/a n/a 5/83-8/83 9.63% Tightening 1.13% 8.50% n/a n/a
12/15/82 8.50% Easing -0.50% 8.50% n/a 10-2 11/22/82 9.00% Easing -0.50% 9.00% n/a 11-1 10/12/82 9.50% Easing -0.50% 9.50% n/a 9-3 09/24/82 10.00% Tightening 0.50% 10.00% Inter-meeting n/a 08/27/82 9.50% Easing -1.00% 10.00% n/a n/a 08/16/82 10.50% Easing -0.50% 10.50% n/a n/a 08/02/82 11.00% Easing -0.50% 11.50% n/a 10-1 07/20/82 11.50% Easing -1.50% 12.00% n/a 7-1 4/82-6/82 13.00% Easing -2.00% 12.00% n/a n/a 1/82-4/82 15.00% Tightening 3.00% 12.00% n/a n/a
12/04/81 12.00% Easing -1.00% 12.00% n/a n/a 11/30/81 13.00% Easing -1.00% 13.00% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 11/02/81 14.00% Easing -1.50% 13.00% n/a n/a 6/81-10/81 15.50% Easing -4.50% 14.00% n/a n/a 05/31/81 20.00% None None 14.00% n/a n/a 05/08/81 20.00% Tightening 4.00% 14.00% n/a n/a 05/05/81 16.00% None None 14.00% n/a n/a 1/81-4/81 16.00% Easing -4.00% 13.00% n/a n/a 01/08/81 20.00% Tightening 0.20% 13.00% n/a n/a
12/29/80 18.00% Easing -2.00% 13.00% n/a n/a 12/05/80 20.00% Tightening 2.00% 13.00% n/a n/a 11/26/80 18.00% Tightening 3.00% 12.00% n/a n/a 11/17/80 15.00% None None 12.00% n/a n/a 11/07/80 15.00% Tightening 1.25% 11.00% n/a n/a 10/80-11/80 13.75% Tightening 1.75% 11.00% n/a n/a 10/01/80 12.00% None None 11.00% n/a n/a 09/26/80 12.00% Tightening 1.00% 11.00% n/a n/a 09/15/80 11.00% Tightening 1.00% 10.00% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 08/07/80 10.00% Tightening 0.50% 10.00% n/a n/a 07/28/80 9.50% None None 10.00% n/a n/a 06/13/80 9.50% None None 11.00% n/a n/a 06/05/80 9.50% Easing -0.75% 12.00% n/a n/a 05/30/80 10.75% None None 12.00% n/a n/a 05/22/80 10.75% Easing -0.75% 13.00% n/a n/a 4/80-5/80 11.50% Easing -8.50% 13.00% n/a n/a 2/80-3/80 20.00% Tightening 5.00% 13.00% n/a n/a 02/15/80 15.00% Tightening 1.00% 13.00% n/a n/a 01/14/80 14.00% None None 12.00% n/a n/a
11/79-12/79 14.00% Easing -1.50% 12.00% n/a n/a 10/25/79 15.50% Tightening 2.50% 12.00% n/a n/a 10/08/79 13.00% Tightening 1.50% 12.00% n/a n/a 09/19/79 11.50% Tightening 0.12% 11.00% n/a n/a 08/31/79 11.38% Tightening 0.38% 10.50% n/a n/a 08/17/79 11.00% Tightening 0.37% 10.50% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 07/27/79 10.63% Tightening 0.13% 10.00% n/a n/a 07/20/79 10.50% Tightening 0.25% 10.00% n/a n/a 04/30/79 10.25% Tightening 0.25% 9.50% n/a n/a
12/20/78 10.00% Tightening 0.12% 9.50% n/a n/a 11/15/78 9.88% Tightening 0.13% 9.50% n/a n/a 11/01/78 9.75% Tightening 0.75% 9.50% n/a n/a 10/18/78 9.00% Tightening 0.25% 8.50% n/a n/a 09/29/78 8.75% Tightening 0.12% 8.00% n/a n/a 09/22/78 8.63% Tightening 0.13% 8.00% n/a n/a 09/20/78 8.50% Tightening 0.12% 7.75% n/a n/a 09/08/78 8.38% Tightening 0.13% 7.75% n/a n/a 08/25/78 8.25% Tightening 0.12% 7.75% n/a n/a 08/21/78 8.13% Tightening 0.13% 7.75% n/a n/a 08/16/78 8.00% Tightening 0.12% 7.25% n/a n/a 07/19/78 7.88% Tightening 0.13% 7.25% n/a n/a 07/03/78 7.75% None None 7.25% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 06/21/78 7.75% Tightening 0.25% 7.00% n/a n/a 05/17/78 7.50% Tightening 0.25% 7.00% n/a n/a 05/11/78 7.25% None None 7.00% n/a n/a 04/27/78 7.25% Tightening 0.12% 6.50% n/a n/a 04/26/78 7.13% Tightening 0.13% 6.50% n/a n/a 04/19/78 7.00% Tightening 0.25% 6.50% n/a n/a 01/09/78 6.75% Tightening 0.25% 6.50% n/a n/a
10/26/77 6.50% None None 6.00% n/a n/a 10/15/77 6.50% Tightening 0.25% 5.75% n/a n/a 09/20/77 6.25% Tightening 0.12% 5.75% n/a n/a 09/15/77 6.13% Tightening 0.13% 5.75% n/a n/a 08/31/77 6.00% None None 5.75% n/a n/a 08/14/77 6.00% Tightening 0.12% 5.25% n/a n/a
12/76-8/77 5.88% Tightening 1.13% 5.25% n/a n/a 11/26/76 4.75% Easing -0.13% 5.25% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 11/22/76 4.88% Easing -0.12% 5.25% n/a n/a 10/13/76 5.00% Easing -0.13% 5.50% n/a n/a 7/76-10/76 5.13% Easing -0.37% 5.50% n/a n/a 05/01/76 5.50% Tightening 0.62% 5.50% n/a n/a 04/21/76 4.88% Tightening 0.13% 5.50% n/a n/a 01/19/76 4.75% None None 5.50% n/a n/a 01/12/76 4.75% Easing -0.13% 6.00% n/a n/a
10/75-1/76 4.88% Easing -1.62% 6.00% n/a n/a 6/75-9/75 6.50% Tightening 1.25% 6.00% n/a n/a 06/01/75 5.25% None None 6.00% n/a n/a 05/16/75 5.25% None None 6.00% n/a n/a 05/01/75 5.25% None None 6.25% n/a n/a 04/30/75 5.25% Easing -0.25% 6.25% n/a n/a 03/21/75 5.50% Easing -0.25% 6.25% n/a n/a 03/10/75 5.75% Easing -0.25% 6.25% n/a n/a 02/26/75 6.00% Easing -0.25% 6.75% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 02/06/75 6.25% Easing -0.25% 6.75% n/a n/a 02/04/75 6.50% Easing -0.50% 7.25% n/a n/a 01/16/75 7.00% Easing -0.25% 7.25% n/a n/a 01/10/75 7.25% Easing -0.75% 7.25% n/a n/a
12/20/74 8.00% Easing -0.25% 7.75% n/a n/a 12/15/74 8.25% Easing -0.75% 7.75% n/a n/a 12/09/74 9.00% Easing -0.25% 7.75% n/a n/a 11/26/74 9.25% None None 8.00% n/a n/a 7/74-11/74 9.25% Easing -3.75% 8.00% n/a n/a 5/74-7/74 13.00% Tightening 1.25% 8.00% n/a n/a 04/25/74 10.75% Tightening 0.75% 8.00% n/a n/a 3/74-4/74 10.00% Tightening 1.00% 7.50% n/a n/a
9/73-2/74 9.00% Easing -2.00% 7.50% n/a n/a 08/30/73 11.00% Tightening 0.50% 7.50% n/a n/a 08/14/73 10.50% None None 7.50% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 07/27/73 10.50% Tightening 0.25% 7.00% n/a n/a 07/15/73 10.25% Tightening 0.75% 7.00% n/a n/a 07/06/73 9.50% Tightening 0.25% 7.00% n/a n/a 07/02/73 9.25% Tightening 0.75% 7.00% n/a n/a 06/11/73 8.50% Tightening 0.25% 6.50% n/a n/a 05/31/73 8.25% Tightening 0.37% 6.00% n/a n/a 05/18/73 7.88% Tightening 0.38% 6.00% n/a n/a 05/11/73 7.50% None 0.25% 6.00% n/a n/a 05/04/73 7.50% Tightening 0.25% 5.75% n/a n/a 03/29/73 7.25% Tightening 0.25% 5.50% n/a n/a 03/14/73 7.00% Tightening 0.25% 5.50% n/a n/a 03/03/73 6.75% None None 5.50% n/a n/a 02/26/73 6.75% Tightening 0.25% 5.50% n/a n/a 02/12/73 6.50% Tightening 0.12% 5.00% n/a n/a 01/27/73 6.38% Tightening 0.38% 5.00% n/a n/a 01/19/73 6.00% Tightening 0.12% 5.00% n/a n/a 01/15/73 5.88% Tightening 0.13% 5.00% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 01/04/73 5.75% Tightening 0.25% 4.50% n/a n/a
3/72-12/72 5.50% Tightening 2.00% 4.50% n/a n/a
12/71-2/72 3.50% Easing -0.50% 4.50% n/a n/a 12/17/71 4.00% Easing -0.13% 4.50% n/a n/a 12/16/71 4.13% Easing -0.43% 4.50% n/a n/a 11/29/71 4.56% Easing -0.19% 4.75% n/a n/a 11/12/71 4.75% Easing -0.25% 4.75% n/a n/a 11/07/71 5.00% Easing -0.13% 4.75% n/a n/a 9/71-10/71 5.13% Easing -0.62% 5.00% n/a n/a 08/15/71 5.75% Tightening 0.25% 5.00% n/a n/a 07/16/71 5.50% Tightening 0.25% 5.00% n/a n/a 07/02/71 5.25% Easing -0.25% 4.75% n/a n/a 3/71-7/71 5.50% Tightening 2.00% 4.75% n/a n/a 02/19/71 3.50% Easing -0.25% 4.75% n/a n/a 02/04/71 3.75% Easing -0.25% 5.00% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 01/22/71 4.00% Easing -0.25% 5.00% n/a n/a 01/12/71 4.25% Easing -0.25% 5.25% n/a n/a 01/08/71 4.50% Easing -0.25% 4.50% n/a n/a
-------Average Monthly Federal Funds and Discount Rates------- 12/01/70 4.90% n/a -0.70% 5.52% n/a n/a 11/01/70 5.60% n/a -0.60% 5.85% n/a n/a 10/01/70 6.20% n/a -0.09% 6.00% n/a n/a 09/01/70 6.29% n/a -0.32% 6.00% n/a n/a 08/01/70 6.61% n/a -0.60% 6.00% n/a n/a 07/01/70 7.21% n/a -0.39% 6.00% n/a n/a 06/01/70 7.60% n/a -0.34% 6.00% n/a n/a 05/01/70 7.94% n/a -0.16% 6.00% n/a n/a 04/01/70 8.10% n/a 0.34% 6.00% n/a n/a 03/01/70 7.76% n/a -1.22% 6.00% n/a n/a 02/01/70 8.98% n/a 0.00% 6.00% n/a n/a 01/01/70 8.98% n/a 0.01% 6.00% n/a n/a 12/01/69 8.97% n/a 0.12% 6.00% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 11/01/69 8.85% n/a -0.15% 6.00% n/a n/a 10/01/69 9.00% n/a -0.15% 6.00% n/a n/a 09/01/69 9.15% n/a -0.04% 6.00% n/a n/a 08/01/69 9.19% n/a 0.58% 6.00% n/a n/a 07/01/69 8.61% n/a -0.29% 6.00% n/a n/a 06/01/69 8.90% n/a 0.23% 6.00% n/a n/a 05/01/69 8.67% n/a 1.26% 6.00% n/a n/a 04/01/69 7.41% n/a 0.62% 5.95% n/a n/a 03/01/69 6.79% n/a 0.18% 5.50% n/a n/a 02/01/69 6.61% n/a 0.31% 5.50% n/a n/a 01/01/69 6.30% n/a 0.28% 5.50% n/a n/a 12/01/68 6.02% n/a 0.20% 5.36% n/a n/a 11/01/68 5.82% n/a -0.09% 5.25% n/a n/a 10/01/68 5.91% n/a 0.13% 5.25% n/a n/a 09/01/68 5.78% n/a -0.25% 5.25% n/a n/a 08/01/68 6.03% n/a 0.01% 5.48% n/a n/a 07/01/68 6.02% n/a -0.05% 5.50% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 06/01/68 6.07% n/a -0.04% 5.50% n/a n/a 05/01/68 6.11% n/a 0.35% 5.50% n/a n/a 04/01/68 5.76% n/a 0.71% 5.20% n/a n/a 03/01/68 5.05% n/a 0.34% 4.66% n/a n/a 02/01/68 4.71% n/a 0.11% 4.50% n/a n/a 01/01/68 4.60% n/a 0.09% 4.50% n/a n/a 12/01/67 4.51% n/a 0.38% 4.50% n/a n/a 11/01/67 4.13% n/a 0.25% 4.18% n/a n/a 10/01/67 3.88% n/a -0.11% 4.00% n/a n/a 09/01/67 3.99% n/a 0.09% 4.00% n/a n/a 08/01/67 3.90% n/a 0.11% 4.00% n/a n/a 07/01/67 3.79% n/a -0.19% 4.00% n/a n/a 06/01/67 3.98% n/a 0.04% 4.00% n/a n/a 05/01/67 3.94% n/a -0.11% 4.00% n/a n/a 04/01/67 4.05% n/a -0.48% 4.10% n/a n/a 03/01/67 4.53% n/a -0.47% 4.50% n/a n/a 02/01/67 5.00% n/a 0.06% 4.50% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 01/01/67 4.94% n/a -0.46% 4.50% n/a n/a 12/01/66 5.40% n/a -0.36% 4.50% n/a n/a 11/01/66 5.76% n/a 0.23% 4.50% n/a n/a 10/01/66 5.53% n/a 0.13% 4.50% n/a n/a 09/01/66 5.40% n/a -0.13% 4.50% n/a n/a 08/01/66 5.53% n/a 0.23% 4.50% n/a n/a 07/01/66 5.30% n/a 0.13% 4.50% n/a n/a 06/01/66 5.17% n/a 0.27% 4.50% n/a n/a 05/01/66 4.90% n/a 0.23% 4.50% n/a n/a 04/01/66 4.67% n/a 0.02% 4.50% n/a n/a 03/01/66 4.65% n/a 0.05% 4.50% n/a n/a 02/01/66 4.60% n/a 0.18% 4.50% n/a n/a 01/01/66 4.42% n/a 0.10% 4.50% n/a n/a 12/01/65 4.32% n/a 0.22% 4.42% n/a n/a 11/01/65 4.10% n/a 0.02% 4.00% n/a n/a 10/01/65 4.08% n/a 0.07% 4.00% n/a n/a 09/01/65 4.01% n/a -0.11% 4.00% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 08/01/65 4.12% n/a 0.03% 4.00% n/a n/a 07/01/65 4.09% n/a 0.05% 4.00% n/a n/a 06/01/65 4.04% n/a -0.06% 4.00% n/a n/a 05/01/65 4.10% n/a 0.01% 4.00% n/a n/a 04/01/65 4.09% n/a 0.05% 4.00% n/a n/a 03/01/65 4.04% n/a 0.06% 4.00% n/a n/a 02/01/65 3.98% n/a 0.08% 4.00% n/a n/a 01/01/65 3.90% n/a 0.05% 4.00% n/a n/a 12/01/64 3.85% n/a 0.33% 4.00% n/a n/a 11/01/64 3.52% n/a 0.16% 3.62% n/a n/a 10/01/64 3.36% n/a -0.09% 3.50% n/a n/a 09/01/64 3.45% n/a -0.05% 3.50% n/a n/a 08/01/64 3.50% n/a 0.08% 3.50% n/a n/a 07/01/64 3.42% n/a -0.08% 3.50% n/a n/a 06/01/64 3.50% n/a 0.00% 3.50% n/a n/a 05/01/64 3.50% n/a 0.03% 3.50% n/a n/a 04/01/64 3.47% n/a 0.04% 3.50% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 03/01/64 3.43% n/a -0.05% 3.50% n/a n/a 02/01/64 3.48% n/a 0.00% 3.50% n/a n/a 01/01/64 3.48% n/a 0.10% 3.50% n/a n/a 12/01/63 3.38% n/a -0.10% 3.50% n/a n/a 11/01/63 3.48% n/a -0.02% 3.50% n/a n/a 10/01/63 3.50% n/a 0.02% 3.50% n/a n/a 09/01/63 3.48% n/a -0.01% 3.50% n/a n/a 08/01/63 3.49% n/a 0.47% 3.50% n/a n/a 07/01/63 3.02% n/a 0.03% 3.24% n/a n/a 06/01/63 2.99% n/a -0.01% 3.00% n/a n/a 05/01/63 3.00% n/a 0.10% 3.00% n/a n/a 04/01/63 2.90% n/a -0.08% 3.00% n/a n/a 03/01/63 2.98% n/a -0.02% 3.00% n/a n/a 02/01/63 3.00% n/a 0.08% 3.00% n/a n/a 01/01/63 2.92% n/a -0.01% 3.00% n/a n/a 12/01/62 2.93% n/a -0.01% 3.00% n/a n/a 11/01/62 2.94% n/a 0.04% 3.00% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 10/01/62 2.90% n/a 0.00% 3.00% n/a n/a 09/01/62 2.90% n/a -0.03% 3.00% n/a n/a 08/01/62 2.93% n/a 0.22% 3.00% n/a n/a 07/01/62 2.71% n/a 0.03% 3.00% n/a n/a 06/01/62 2.68% n/a 0.32% 3.00% n/a n/a 05/01/62 2.36% n/a -0.42% 3.00% n/a n/a 04/01/62 2.78% n/a -0.07% 3.00% n/a n/a 03/01/62 2.85% n/a 0.48% 3.00% n/a n/a 02/01/62 2.37% n/a 0.22% 3.00% n/a n/a 01/01/62 2.15% n/a -0.18% 3.00% n/a n/a 12/01/61 2.33% n/a -0.28% 3.00% n/a n/a 11/01/61 2.61% n/a 0.35% 3.00% n/a n/a 10/01/61 2.26% n/a 0.38% 3.00% n/a n/a 09/01/61 1.88% n/a -0.12% 3.00% n/a n/a 08/01/61 2.00% n/a 0.83% 3.00% n/a n/a 07/01/61 1.17% n/a -0.56% 3.00% n/a n/a 06/01/61 1.73% n/a -0.25% 3.00% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 05/01/61 1.98% n/a 0.49% 3.00% n/a n/a 04/01/61 1.49% n/a -0.53% 3.00% n/a n/a 03/01/61 2.02% n/a -0.52% 3.00% n/a n/a 02/01/61 2.54% n/a 1.00% 3.00% n/a n/a 01/01/61 1.54% n/a -0.44% 3.00% n/a n/a 12/01/60 1.98% n/a -0.46% 3.00% n/a n/a 11/01/60 2.44% n/a -0.03% 3.00% n/a n/a 10/01/60 2.47% n/a -0.13% 3.00% n/a n/a 09/01/60 2.60% n/a -0.38% 3.00% n/a n/a 08/01/60 2.98% n/a -0.25% 3.18% n/a n/a 07/01/60 3.23% n/a -0.09% 3.50% n/a n/a 06/01/60 3.32% n/a -0.53% 3.65% n/a n/a 05/01/60 3.85% n/a -0.07% 4.00% n/a n/a 04/01/60 3.92% n/a 0.08% 4.00% n/a n/a 03/01/60 3.84% n/a -0.13% 4.00% n/a n/a 02/01/60 3.97% n/a -0.02% 4.00% n/a n/a 01/01/60 3.99% n/a 0.00% 4.00% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 12/01/59 3.99% n/a -0.01% 4.00% n/a n/a 11/01/59 4.00% n/a 0.02% 4.00% n/a n/a 10/01/59 3.98% n/a 0.22% 4.00% n/a n/a 09/01/59 3.76% n/a 0.26% 3.83% n/a n/a 08/01/59 3.50% n/a 0.03% 3.50% n/a n/a 07/01/59 3.47% n/a 0.08% 3.50% n/a n/a 06/01/59 3.39% n/a 0.49% 3.50% n/a n/a 05/01/59 2.90% n/a -0.06% 3.05% n/a n/a 04/01/59 2.96% n/a 0.16% 3.00% n/a n/a 03/01/59 2.80% n/a 0.37% 2.92% n/a n/a 02/01/59 2.43% n/a -0.05% 2.50% n/a n/a 01/01/59 2.48% n/a 0.06% 2.50% n/a n/a 12/01/58 2.42% n/a 0.15% 2.50% n/a n/a 11/01/58 2.27% n/a 0.47% 2.40% n/a n/a 10/01/58 1.80% n/a 0.04% 2.00% n/a n/a 09/01/58 1.76% n/a 0.23% 1.91% n/a n/a 08/01/58 1.53% n/a 0.85% 1.75% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 07/01/58 0.68% n/a -0.25% 1.75% n/a n/a 06/01/58 0.93% n/a 0.30% 1.75% n/a n/a 05/01/58 0.63% n/a -0.63% 1.75% n/a n/a 04/01/58 1.26% n/a 0.06% 2.03% n/a n/a 03/01/58 1.20% n/a -0.47% 2.35% n/a n/a 02/01/58 1.67% n/a -1.05% 2.75% n/a n/a 01/01/58 2.72% n/a -0.26% 2.94% n/a n/a 12/01/57 2.98% n/a -0.30% 3.00% n/a n/a 11/01/57 3.28% n/a -0.22% 3.23% n/a n/a 10/01/57 3.50% n/a 0.03% 3.50% n/a n/a 09/01/57 3.47% n/a 0.23% 3.50% n/a n/a 08/01/57 3.24% n/a 0.25% 3.15% n/a n/a 07/01/57 2.99% n/a -0.01% 3.00% n/a n/a 06/01/57 3.00% n/a 0.00% 3.00% n/a n/a 05/01/57 3.00% n/a 0.00% 3.00% n/a n/a 04/01/57 3.00% n/a 0.04% 3.00% n/a n/a 03/01/57 2.96% n/a -0.04% 3.00% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 02/01/57 3.00% n/a 0.16% 3.00% n/a n/a 01/01/57 2.84% n/a -0.10% 3.00% n/a n/a 12/01/56 2.94% n/a 0.06% 3.00% n/a n/a 11/01/56 2.88% n/a -0.08% 3.00% n/a n/a 10/01/56 2.96% n/a 0.01% 3.00% n/a n/a 09/01/56 2.95% n/a 0.22% 3.00% n/a n/a 08/01/56 2.73% n/a -0.02% 2.81% n/a n/a 07/01/56 2.75% n/a 0.04% 2.75% n/a n/a 06/01/56 2.71% n/a -0.04% 2.75% n/a n/a 05/01/56 2.75% n/a 0.13% 2.75% n/a n/a 04/01/56 2.62% n/a 0.12% 2.65% n/a n/a 03/01/56 2.50% n/a 0.00% 2.50% n/a n/a 02/01/56 2.50% n/a 0.05% 2.50% n/a n/a 01/01/56 2.45% n/a -0.03% 2.50% n/a n/a 12/01/55 2.48% n/a 0.13% 2.50% n/a n/a 11/01/55 2.35% n/a 0.11% 2.36% n/a n/a 10/01/55 2.24% n/a 0.06% 2.25% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 09/01/55 2.18% n/a 0.22% 2.18% n/a n/a 08/01/55 1.96% n/a 0.28% 1.97% n/a n/a 07/01/55 1.68% n/a 0.04% 1.75% n/a n/a 06/01/55 1.64% n/a 0.21% 1.75% n/a n/a 05/01/55 1.43% n/a 0.00% 1.75% n/a n/a 04/01/55 1.43% n/a 0.08% 1.63% n/a n/a 03/01/55 1.35% n/a 0.06% 1.50% n/a n/a 02/01/55 1.29% n/a -0.10% 1.50% n/a n/a 01/01/55 1.39% n/a 0.11% 1.50% n/a n/a 12/01/54 1.28% n/a 0.45% 1.50% n/a n/a 11/01/54 0.83% n/a -0.02% 1.50% n/a n/a 10/01/54 0.85% n/a -0.21% 1.50% n/a n/a 09/01/54 1.06% n/a -0.16% 1.50% n/a n/a 08/01/54 1.22% n/a 0.42% 1.50% n/a n/a
---------------------Discount Rate Changes-------------------- 07/01/54 0.80% n/a n/a 1.50% n/a n/a 04/16/54 n/a n/a n/a 1.50% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 02/05/54 n/a n/a n/a 1.75% n/a n/a
01/16/53 n/a n/a n/a 2.00% n/a n/a
08/21/50 n/a n/a n/a 1.75% n/a n/a
08/13/48 n/a n/a n/a 1.50% n/a n/a 01/12/48 n/a n/a n/a 1.25% n/a n/a
04/25/46 n/a n/a n/a 1.00% n/a n/a
10/30/42 n/a n/a n/a 0.50% n/a n/a
08/27/37 n/a n/a n/a 1.00% n/a n/a
02/02/34 n/a n/a n/a 1.50% n/a n/a
============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================ 10/20/33 n/a n/a n/a 2.00% n/a n/a 05/26/33 n/a n/a n/a 2.50% n/a n/a 04/07/33 n/a n/a n/a 3.00% n/a n/a 03/03/33 n/a n/a n/a 3.50% n/a n/a
06/24/32 n/a n/a n/a 2.50% n/a n/a 02/26/32 n/a n/a n/a 3.00% n/a n/a
10/16/31 n/a n/a n/a 3.50% n/a n/a 10/09/31 n/a n/a n/a 2.50% n/a n/a 05/08/31 n/a n/a n/a 1.50% n/a n/a
12/24/30 n/a n/a n/a 2.00% n/a n/a 06/20/30 n/a n/a n/a 2.50% n/a n/a 05/02/30 n/a n/a n/a 3.00% n/a n/a 03/14/30 n/a n/a n/a 3.50% n/a n/a 02/07/30 n/a n/a n/a 4.00% n/a n/a ============================================================================ Announce. Fed Funds Direction Amount of Discount Policy FOMC Date Target Change Rate(*) Concern Vote ============================================================================
11/15/29 n/a n/a n/a 4.50% n/a n/a 11/01/29 n/a n/a n/a 5.00% n/a n/a 08/09/29 n/a n/a n/a 6.00% n/a n/a
07/13/28 n/a n/a n/a 5.00% n/a n/a 05/18/28 n/a n/a n/a 4.50% n/a n/a 02/03/28 n/a n/a n/a 4.00% n/a n/a
08/05/27 n/a n/a n/a 3.50% n/a n/a
08/13/26 n/a n/a n/a 4.00% n/a n/a 04/23/26 n/a n/a n/a 3.50% n/a n/a 01/08/26 n/a n/a n/a 4.00% n/a n/a
02/27/25 n/a n/a n/a 3.50% n/a n/a
08/08/24 n/a n/a n/a 3.00% n/a n/a 06/12/24 n/a n/a n/a 3.50% n/a n/a 05/01/24 n/a n/a n/a 4.00% n/a n/a
02/23/23 n/a n/a n/a 4.50% n/a n/a
06/22/22 n/a n/a n/a 4.00% n/a n/a
11/03/21 n/a n/a n/a 4.50% n/a n/a 09/22/21 n/a n/a n/a 5.00% n/a n/a 07/21/21 n/a n/a n/a 5.50% n/a n/a 06/16/21 n/a n/a n/a 6.00% n/a n/a 05/05/21 n/a n/a n/a 6.50% n/a n/a
06/01/20 n/a n/a n/a 7.00% n/a n/a 01/23/20 n/a n/a n/a 6.00% n/a n/a
11/03/19 n/a n/a n/a 4.75% n/a n/a
04/06/18 n/a n/a n/a 4.00% n/a n/a
12/21/17 n/a n/a n/a 3.50% n/a n/a
09/26/16 n/a n/a n/a 3.00% n/a n/a
02/18/15 n/a n/a n/a 4.00% n/a n/a 02/03/15 n/a n/a n/a 4.50% n/a n/a
12/23/14 n/a n/a n/a 5.00% n/a n/a 12/18/14 n/a n/a n/a 5.50% n/a n/a 11/16/14 n/a n/a n/a 6.00% n/a n/a ============================================================================ NOTE:(*) The discount rate was changed to the primary credit rate on Jan. 9, 2003.
Dissension Details: 06/25/08 Mr. Fisher dissented because he preferred an increase in the target federal funds rate at this meeting. While the financial system was still frail and downside risks to growth remained, the risk that inflation would fail to moderate as expected by the Committee had increased substantially over the intermeeting period. Relatively strong demand for oil and other commodities abroad, as well as increased labor and other operating costs in the emerging economies, was boosting prices of globally traded goods and services. Mr. Fisher was especially concerned about behavioral changes among business operators that appeared to be accommodating inflationary pressures. In particular, firms increasingly appeared to be planning to pass through their higher input costs to final goods prices in order to protect their profit margins. Overall, Mr. Fisher viewed inflation expectations as becoming less well anchored. To help restrain inflation expectations and inflation, Mr. Fisher felt it would be appropriate for the Committee to tighten the stance of monetary policy.
04/30/08 Messrs. Fisher and Plosser dissented because they preferred no change in the target federal funds rate at this meeting. Although the economy had been weak, it had evolved roughly as expected since the previous meeting. Stresses in financial markets also had continued, but the Federal Reserve's liquidity facilities were helpful in that regard and the more worrisome development in their view was the outlook for inflation. Rising prices for prices, energy, and other commodities; signs of higher inflation expectations; and a negative real federal funds rate raised substantial concerns about the prospects for inflation. Mr. Plosser cited the recent rapid growth of monetary aggregates as additional evidence that the economy had ample liquidity after the aggressive easing of policy to date. Mr. Fisher was concerned that an adverse feedbank loop was developing by which lowering the funds rate had been pushing down the exchange value of the dollar, contributing to higher commodity and import prices, cutting real spending by businesses and households, and therefore ultimately impairing economic activity. To help prevent inflation expectations from becoming unhinged, both Messrs. Fisher and Plosser felt the Committee should put additional emphasis on its price stability goal at this point, and they believed that another reduction in the funds rate at this meeting could prove costly over the longer run.
run.
03/18/08 Messrs. Fisher and Plosser dissented because, in light of heightened inflation risks, they favored easing policy less aggressively. Incoming data suggested a weaker near-term outlook for economic growth, but the Committee's earlier policy moves had already reduced the target federal funds rate by 225 basis points to address risks to growth, and the full effect of those rate cuts had yet to be felt. While financial markets remained under stress, the Federal Reserve had already taken separate, significant actions to address liquidity issues in markets. In fact, Mr. Fisher felt that focusing on measures targeted at relieving liquidity strains would improve economic prospects more quickly and lastingly than would further reductions in the federal funds rate at this point; he believed that alleviating these strains would increase the efficacy of the earlier rate cuts. Both Messrs. Fisher and Plosser were concerned that inflation expectations could potentially become unhinged should the Committee continue to lower the funds rate in the current environment. They pointed to measures of inflation and indicators of inflation expectations that had risen, and Mr. Fisher stressed the international influences on U.S. inflation rates. Mr. Plosser noted that the Committee could not afford to wait until there was clear evidence that inflation expectations were no longer anchored, as by then it would be too late to prevent a further increase in inflation pressures.
01/30/08 Voting against was Richard W. Fisher, who preferred no change in the target for the federal funds rate at this meeting.
01/22/08 Voting against was William Poole, who did not believe that current conditions justified policy action before the regularly scheduled meeting next week. Absent and not voting was Frederic S. Mishkin.
10/31/07 Mr. Hoenig dissented because he believed that policy should remain unchanged at this meeting. Projections for the U.S. and global economies suggested that growth was likely to proceed at a reasonable pace over the outlook period. To better assure that outcome, the FOMC had moved rates down significantly at its September meeting. At this meeting, inflation risks appeared elevated and Mr. Hoenig felt that the target federal funds rate was currently close to neutral. In these circumstances, he judged that policy needed to be slightly firm to better hold inflation in check. Going forward, if the data suggested the Committee needed to ease further, it could do so. He also recognized that liquidity remains a near-term challenge and that the Federal Reserve would be prepared to act if needed. Mr. Hoenig saw the risks to both economic growth and inflation to be elevated and preferred to wait, watch, and be ready to depending on how events developed.
12/12/06 Mr. Lacker dissented because he believed that further tightening was needed to help ensure that core inflation declines to an acceptable rate in coming quarters.
10/25/06 Mr. Lacker dissented because he believed that further tightening was needed to help ensure that core inflation declines to an acceptable rate in coming quarters.
09/20/06 Mr. Lacker dissented because he believed that further tightening was needed to bring inflation down more rapidly than would be the case if the policy rate were kept unchanged. Recent data indicated that inflation remained above levels consistent with price stability. Moreover, the upswing in compensation and unit labor costs in the first half of the year indicated that inflation risks were tilted to the upside. Although real growth was likely to be moderate in coming quarters, in his view it was unlikely to be slow enough to bring core inflation down.
08/08/06 Jeffery Lacker dissented because he preferred an increase of 25 basis points in the federal funds rate target at this meeting.
09/20/05 Mr. Olson dissented because he preferred that the Committee defer policy action at this meeting, pending the receipt of additional information on the economic effects resulting from the severe shock of Hurricane Katrina.
06/25/03 Voting against the action was Robert T. Parry. President Parry preferred a 50 basis point reduction in the target for the federal funds rate.
09/24/02 Messrs. Gramlich and McTeer dissented because they preferred to ease monetary policy at this meeting. The economic expansion, which resumed almost a year ago, had recently lost momentum, and job growth had been minimal over the past year. With inflation already low and likely to decline further in the face of economic slack and rapid productivity growth, the potential cost of additional stimulus seemed low compared with the risk of further weakness.
12/11/01 Mr. Hoenig dissented because he preferred to leave the federal funds rate unchanged. He judged that a 2 percent federal funds rate was already quite stimulative and that a more stimulative policy was not needed. Following the rapid and aggressive policy actions already taken, it would be prudent to give the current policy more time to work through the economy. It was also his position that reducing the federal funds rate at this meeting could increase interest rate volatility by creating an expectation of a faster or a more aggressive reversal of policy.
06/27/01 Mr. Poole dissented because he believed the FOMC actions this year had already established a highly stimulative monetary policy stance. The M2 and MZM measures of money had risen at annual rates in excess of 10 percent and 20 percent respectively over the past six months, and the real federal funds rate was very likely below its equilibrium level. Other more qualitative information on financial conditions pointed in the same direction. Economic forecasts were that the economy's growth would resume later this year and the fact that long-term interest rates had not declined since December also indicated that the market anticipated a revival of faster economic growth before long. Given the lags in monetary processes, he believed that adding further monetary policy stimulus raised an undue risk of fostering higher inflation in the future. Moreover, against this background, he was especially concerned that a statement that the Committee continued to view the balance of risks as weighted toward weakness would be read in the market as a sign that the Committee was likely to ease further in the near term. He thought future developments were equally likely to warrant an action in either direction, and he did not think the Committee should take a step that probably would cause expectations of further easing to become embedded in market interest rates.
05/15/01 Mr. Hoenig dissented because he preferred a less aggressive easing action involving a reduction of 25 basis points in the federal funds rate. While the risks of weaker economic growth still tended to dominate those of rising inflation and called for some further easing, the Committee had added significant liquidity to the economy this year through its cumulatively large easing actions. The lagged effects of those actions should be felt increasingly over time. Moreover, following the rapid and aggressive policy actions already taken, a more cautious policy move at this point would in his view appropriately limit the risks of producing an overly accommodative policy stance and rising inflation over time.
08/24/99 Mr. McTeer dissented for essentially the same reasons he did at the June 30 meeting: low inflation and, except for energy, minimal inflation in the pipeline. He believes that positive supply-side forces will continue to damp the impact of strong demand on output prices and that productivity gains will continue to damp the effect of higher wages on unit labor costs.
06/30/99 Mr. McTeer dissented because he believed that tightening was unnecessary to contain inflation. He noted that most measures of current inflation remain low, and he saw few signs of inflation in the pipeline. Conditions that called for a preemptive tightening in 1994--rapidly rising commodity prices and real short-term interest rates near zero--are not present today. While money growth has been rapid by historical standards, market-based indicators of monetary policy suggest sufficient restraint. Except for oil, most sensitive commodity prices have risen only slightly after years of decline, the dollar remains strong, real short-term interest rates are near historical norms, and productivity growth has accelerated in recent quarters. Mr. McTeer does not believe that rapid growth based on new technology, rising productivity, and other supply-side factors is inflationary, especially in the current global environment. He would have preferred to continue to test the growth limits of the new economy.
11/17/98 Mr. Jordan dissented because he believed that the two recent reductions in the Federal funds rate were sufficient responses to the stresses in financial markets that had emerged suddenly in late August. An additional rate reduction risked fueling an unsustainably strong growth rate of domestic demand. He expressed concern that the excessively rapid rates of growth of the monetary and credit aggregates were inconsistent with continued low inflation. Moreover, any further monetary expansion in response to economic weakness abroad could ultimately have a disrupting influence on domestic prosperity if policy were forced to reverse course at a later date to defend the purchasing power of the dollar.
08/18/98 Mr. Jordan dissented because he believed that the underlying strength of aggregate demand in the U.S. economy would remain fundamentally intact, despite economic problems abroad. The problems in Asia provide a channel for economic imbalances to develop. Exports from some U.S. manufacturing industries will decline due to softer foreign markets and import competition. At the same time, domestic demand for imports, housing, and consumer durables will increase due to favorable interest rate trends. Though U.S. production of goods and services might slow during the period ahead, it is not yet clear that total demand will diminish at a comparable pace. At the same time, ample credit provision encourages speculative lending and excessive consumption. Consequently, continued rapid growth in the money supply creates the risk that inflation will accelerate and economic imbalances will become protracted.
07/01/98 Mr. Jordan dissented because he believed that the unsustainably rapid growth of domestic demand--fueled by the acceleration of money and credit growth in the past year--was reflected in the recent sharp increase in imports and rising trade deficits. As U.S. output growth slows significantly from the rapid pace of 1997 and early 1998, it will be essential that domestic demand also slow. The very welcome progress toward eliminating inflation in recent years has contributed to the outstanding performance of the economy. Allowing domestic demand to continue to exceed domestic production would run the risk that corrosive effects of rising inflation would undermine future growth prospects. Furthermore, the resultant trade and current account deficits would have to be matched by ever larger inflows of foreign capital. Modest monetary restraint at this time might prevent either the buildup of inflationary imbalances that would eventually necessitate future policy restraint or unsustainable capital flows. In either case an economic contraction might become unavoidable.
05/19/98 Mr. Poole dissented because he believed that the sustained increase in money growth in recent quarters and associated accommodative conditions in the credit markets pointed to rising inflation. Although faster productivity growth suggested that trend output growth might be modestly higher than previously thought, the growth rate of aggregate demand over the past two years clearly had exceeded the economy's long-run growth potential. Without a reduction of aggregate demand growth, inflation would rise. In his view, the Federal Reserve should therefore take prompt action to reduce money growth to limit the rise in inflation and to avoid an increase in longer-term inflation expectations, which would tend to destabilize aggregate employment and financial markets.
Mr. Jordan also noted that the monetary and credit aggregates had accelerated further from already rapid growth rates in 1997. In his view, these high growth rates were fueling unsustainably rapid increases of real estate and other asset prices, and reports of ``too much cash chasing too few deals'' were becoming more frequent. Anticipated gains on both real and financial investments had risen relative to the cost of borrowed funds. In these circumstances, it was increasingly likely that the Committee would face a choice between smaller increases in interest rates sooner versus larger increases later. He added that maximum sustainable economic growth occurs when businesses and households act on the assumption that the dollar will maintain its value over time, and nothing he had heard from consumer groups, bankers, or other business people in his District led him to believe that decisions were being made in the expectation that the purchasing power of the dollar would be stable. Furthermore, expectations that market values of income- producing investments would continuously rise relative to underlying earning streams were not consistent with a stable purchasing power of money. He also believed that the view that real interest rates currently were high was not confirmed by observed behavior. Bankers told him that both consumers and businesses believed that credit was cheap and plentiful. These potentially inflationary conditions and imbalances in the economy were not conducive to sustained maximum growth.
03/31/98 Mr. Jordan dissented because growth rates of various measures of money and credit in the second half of 1997 and the first quarter of this year were not consistent in his view with continued progress in reducing inflation. Recent price statistics understated the trend rates of inflation. The one-time effects of falling oil prices, lower food prices, and recent appreciation of the dollar on foreign-exchange markets provided only a temporary reduction of inflation. While some reacceleration of reported rates of inflation was probably unavoidable, sustained rapid money growth would risk even higher inflation in future years. The durability of the economic expansion would be jeopardized by price and wage decisions reflecting expectations that the purchasing power of the dollar would decline at faster rates in the future. Once such expectations became imbedded in the economy, even stronger policy actions would be required in order to reestablish a downward trend of inflation.
12/16/97 Mr. Broaddus dissented because he continued to believe that a modest tightening of policy would be prudent in light of the apparent persisting strength in aggregate demand for goods and services. He recognized the case for holding policy steady given recent developments in East Asian economies and financial markets; he believed, however, that a slight firming at this meeting would provide valuable insurance against the risk that demand growth might remain above a sustainable trend and require a sharper policy response later. He thought further that the potential benefits of this insurance outweighed the risk that such an action would have a significant negative impact on U.S. economic activity. He also believed that signaling a greater willingness to tolerate modest policy adjustments in response to emerging developments would foster more flexible movements in longer-term financial markets, and specifically enable longer- term interest rates to play their traditional role as automatic stabilizers for the economy more effectively.
11/12/97 Mr. Broaddus dissented because he believed that a modest tightening of policy would be prudent in view of the recent strength in aggregate demand for goods and services; such demand appeared to be growing considerably more rapidly than the sustainable rate at which it could be supplied without an increase in inflation. While he recognized that a tightening at this meeting presented risks in view of recent financial and economic developments in East Asia, he believed these risks were outweighed by the risk that policy would have to be tightened more aggressively if action were delayed, demand remained robust, and the recent apparent reduction in inflationary expectations were reversed. The negative impact on economic activity in such circumstances would be markedly greater than if a more modest action were taken at this meeting.
05/20/97 Mr. Broaddus dissented because he believed that the strength of investment demand, due possibly to an increase in the trend growth rate of productivity, required somewhat higher real interest rates to prevent inflationary pressures from developing. He was concerned that, with the economy already operating at a high level and labor markets apparently very tight, any increase in such pressures might be costly to reverse and might reduce the credibility of the Committee's longer-run strategy of promoting maximum sustainable growth by fostering price level stability. He also believed that the risk to the economy of a moderate further tightening was small given the apparent momentum of aggregate economic activity.
09/24/96 Mr. Stern dissented because he believed that a modestly more restrictive policy was appropriate. In his view, historical precedents suggested that prolonged periods of taut labor markets were eventually associated with rising inflation. Given prevailing pressures on resources, especially labor, Mr. Stern was concerned about the distinct risk of an acceleration of inflation. Should this acceleration occur, he believed it would prove disruptive to the favorable performance of the economy, and he preferred to begin to address this risk promptly.
08/20/96 Mr. Stern dissented because he believed that policy should become modestly more restrictive. He was concerned that, in the absence of a substantial and sustained improvement in productivity, the prevailing pattern of demand might engender an increase in inflationary pressures, and that such pressures would ultimately threaten the ongoing economic expansion. In Mr. Stern's judgment, it was prudent at this point to resist such a development in order to lay a foundation for the long-term health of the economy.
07/03/96 Mr. Stern dissented because he was convinced that a modestly more restrictive policy was warranted. In his view, the momentum of the economy and strains on capacity in labor and some other markets raised the possibility of an acceleration of inflation that would jeopardize the economic expansion. This concern aside, Mr. Stern also believed that current circumstances were favorable for policy action to reduce inflation further and thereby help to sustain the ongoing improvement in the economy.
11/15/95 Mr. Lindsey dissented because he believed a rate cut was necessary due to high consumer debt levels and uncertainty as to when the federal budget impasse would end.
07/06/95 Mr. Hoenig dissented because he believed that it would be prudent to adopt an asymmetric directive and wait for information rather than to move at this juncture based on the projections and the evidence that we have about the real fed funds rate.
12/20/94 Governor LaWare dissented.
11/15/94 President Broaddus dissented.
09/27/94 President Broaddus dissented.
07/06/94 President Broaddus and Governor Lindsey dissented. At the end of this meeting, Mr. Lindsey indicated to Chairman Greenspan that his dissent on the operational paragraph was based on a possible misunderstanding of the implications of the bias in the directive. His dissent was from a directive that he perceived as calling for a more or less automatic tightening of policy during the intermeeting period. On the understanding that any tightening during the intermeeting period would depend on further indications of inflationary developments, Mr. Lindsey requested that his vote be recorded in the minutes as in favor of this policy action. Chairman Greenspan agreed that his request was appropriate.
03/22/94 President Broaddus and President Jordan dissented.
12/21/93 Governor Angell and Governor Lindsey dissented.
06/07/93 Governor Angell dissented.
05/18/93 Governor Angell and President Boehne dissented.
03/23/93 Governor Angell and Governor Lindsey dissented.
11/17/92 President Jordan, Governor LaWare and President Melzer dissented.
10/06/92 President Jordan, Governor LaWare, Governor Lindsey and President Melzer dissented.
08/18/92 Governor LaWare and President Melzer dissented.
07/01/92 Governor LaWare and President Melzer dissented.
12/17/91 Governor LaWare dissented.
11/05/91 Governor Angell and Governor Kelley dissented.
10/02/90 Governor Angell, President Boykin, Presdient Hoskins and Governor Seger dissented.
05/15/90 President Hoskins dissented.
03/27/90 Governor Angell, President Hoskins, and Governor LaWare dissented.
02/07/90 President Boykin, Presdient Hoskins and Governor Seger dissented.
12/19/89 Governor Angell and President Melzer dissented.
07/06/89 Governor Seger dissented.
To contact the reporter on this story: Alex Tanzi in Washington at atanzi@bloomberg.net
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China Cuts Interest Rate for 2nd Time in Three Weeks
By [bn:PRSN=1] Li Yanping [] and William Bi
Enlarge Image/Details
Oct. 8 (Bloomberg) -- China cut interest rates for the second time in three weeks as the global financial crisis threatened to undermine the world's fourth-largest economy.
The People's Bank of China said it would lower the key one- year lending rate by 27 basis points to 6.93 percent, and the one-year deposit rate by the same amount to 3.87 percent, according to a statement on its Web site. It also cut the proportion of deposits that banks must set aside by 50 basis points effective Oct. 15.
The cut came as the Federal Reserve, European Central Bank and four other central banks lowered interest rates in an emergency coordinated bid to ease the economic effects of the financial crisis. China cut borrowing costs for the first time in six years on Sept. 15 to reduce the risk of an economic slump.
``We expect China's government to continue loosening monetary policy and draw on its fiscal resources to bolster investments in infrastructure,'' said Jing Ulrich, Hong Kong- based chairwoman of China equities at JPMorgan.
China's announcement didn't include any reference to the cuts from the Fed, the ECB and central banks in the U.K., Switzerland, Sweden and Canada.
``China's participation in this seemingly coordinate rate cut is encouraging given its importance to the global economy,'' said Ulrich. ``China is becoming more responsible as an involved stakeholder in the global financial community.''
Shared Goal
``All countries should take the responsibility to cooperate as we share the same interest and goal in facing this crisis,'' the People's Bank of China said Oct. 4, after the U.S. Congress approved that nation's $700 billion bailout plan.
Australia cut its benchmark interest rate by one percentage point, the most since a recession in 1992, yesterday. Hong Kong lowered its base lending rate for banks today.
China shifted emphasis from fighting inflation to sustaining growth in July, when the Communist Party's top decision-making body, the Politburo, dropped any reference to maintaining a ``tight'' monetary policy.
Tax Cut
China will temporarily eliminate individuals' taxes on interest earnings from savings accounts, the official Xinhua News Agency said in a statement on its Web site today, citing the State Council.
``We also see the abolishment of the 5 percent interest income tax as modestly positive for personal consumption,'' said Liang Hong, an economist with Goldman Sachs Group Inc. in Hong Kong.
Signs of weakness in China's economy, which has slowed for four quarters, span industrial production, export orders and the 62 percent fall in the CSI 300 Index of stocks this year. Output grew by the least in six years in August and orders dropped in the third quarter to the lowest level since 2005.
Property has slumped in cities including Shenzhen, where house prices slid 6.4 percent in August from a year earlier, after gains of as much as 21 percent during 2007.
``There are challenges ahead, in particular, a housing sector correction, financial difficulties among small- and medium size firms, and weakening export growth,'' said Ben Simpfendorfer, an economist with Royal Bank of Scotland Plc in Hong Kong. ``The urgency for fiscal and monetary easing is less pressing in China relative to the rest of the world as growth slows, not slumps.''
Yuan's Gains
The central bank has already reduced gains by the yuan against the dollar, eased annual quotas that limit lending by banks and increased export-tax rebates for garments and textiles to protect jobs and stimulate growth.
Morgan Stanley cut this month its forecast for China's economic growth to 9.8 percent this year and 8.2 percent next year. That's down from an 11.9 percent expansion in 2007.
To contact the reporter on this story: Li Yanping in Beijing at yli16@bloomberg.net
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Enlarge Image/Details
Oct. 8 (Bloomberg) -- China cut interest rates for the second time in three weeks as the global financial crisis threatened to undermine the world's fourth-largest economy.
The People's Bank of China said it would lower the key one- year lending rate by 27 basis points to 6.93 percent, and the one-year deposit rate by the same amount to 3.87 percent, according to a statement on its Web site. It also cut the proportion of deposits that banks must set aside by 50 basis points effective Oct. 15.
The cut came as the Federal Reserve, European Central Bank and four other central banks lowered interest rates in an emergency coordinated bid to ease the economic effects of the financial crisis. China cut borrowing costs for the first time in six years on Sept. 15 to reduce the risk of an economic slump.
``We expect China's government to continue loosening monetary policy and draw on its fiscal resources to bolster investments in infrastructure,'' said Jing Ulrich, Hong Kong- based chairwoman of China equities at JPMorgan.
China's announcement didn't include any reference to the cuts from the Fed, the ECB and central banks in the U.K., Switzerland, Sweden and Canada.
``China's participation in this seemingly coordinate rate cut is encouraging given its importance to the global economy,'' said Ulrich. ``China is becoming more responsible as an involved stakeholder in the global financial community.''
Shared Goal
``All countries should take the responsibility to cooperate as we share the same interest and goal in facing this crisis,'' the People's Bank of China said Oct. 4, after the U.S. Congress approved that nation's $700 billion bailout plan.
Australia cut its benchmark interest rate by one percentage point, the most since a recession in 1992, yesterday. Hong Kong lowered its base lending rate for banks today.
China shifted emphasis from fighting inflation to sustaining growth in July, when the Communist Party's top decision-making body, the Politburo, dropped any reference to maintaining a ``tight'' monetary policy.
Tax Cut
China will temporarily eliminate individuals' taxes on interest earnings from savings accounts, the official Xinhua News Agency said in a statement on its Web site today, citing the State Council.
``We also see the abolishment of the 5 percent interest income tax as modestly positive for personal consumption,'' said Liang Hong, an economist with Goldman Sachs Group Inc. in Hong Kong.
Signs of weakness in China's economy, which has slowed for four quarters, span industrial production, export orders and the 62 percent fall in the CSI 300 Index of stocks this year. Output grew by the least in six years in August and orders dropped in the third quarter to the lowest level since 2005.
Property has slumped in cities including Shenzhen, where house prices slid 6.4 percent in August from a year earlier, after gains of as much as 21 percent during 2007.
``There are challenges ahead, in particular, a housing sector correction, financial difficulties among small- and medium size firms, and weakening export growth,'' said Ben Simpfendorfer, an economist with Royal Bank of Scotland Plc in Hong Kong. ``The urgency for fiscal and monetary easing is less pressing in China relative to the rest of the world as growth slows, not slumps.''
Yuan's Gains
The central bank has already reduced gains by the yuan against the dollar, eased annual quotas that limit lending by banks and increased export-tax rebates for garments and textiles to protect jobs and stimulate growth.
Morgan Stanley cut this month its forecast for China's economic growth to 9.8 percent this year and 8.2 percent next year. That's down from an 11.9 percent expansion in 2007.
To contact the reporter on this story: Li Yanping in Beijing at yli16@bloomberg.net
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U.S. Pending Home Resales Rose 7.4% as Foreclosures Cut Prices
By Timothy R. Homan
Oct. 8 (Bloomberg) -- More Americans unexpectedly signed contracts in August to purchase previously owned homes as mounting foreclosures pushed down prices, making homes more affordable.
The index of pending home resales rose 7.4 percent, the most since October 2001, after falling 2.7 percent in July, the National Association of Realtors said today in Washington. The increase is the fourth so far this year.
Purchases ``have apparently been boosted by sales of heavily discounted foreclosed homes,'' James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, said before the report. ``Still, we expect even existing home sales will fall somewhat further, reflecting an intensifying credit crunch and broad-based weakening in the economy.''
The Federal Reserve and other central banks today cut interest rates as part of a coordinated effort to help ease credit concerns amid the worst financial crisis since the Great Depression. Still, with concern that property values will keep sinking and foreclosures will mount, banks remain reluctant to lend to potential homebuyers.
Economists projected the index would fall 1.3 percent, according to the median of 38 forecasts in a Bloomberg News survey. Estimates ranged from a drop of 3.2 percent to a 4 percent gain.
Pending resales were up 8.8 percent from August 2007.
Regional Breakdown
All four regions saw pending sales increase from July. The West, an area where foreclosures are particularly prevalent, saw the biggest rise in pending sales with an 18.4 percent jump. Resales climbed 8.4 percent in the Northeast, 3.6 percent in the Midwest and 2.3 percent in the South.
Compared with a year ago, pending resales were up in all regions except the South.
Pending resales are considered a leading indicator because they track contract signings. Closings, which typically occur a month or two later, are tallied in a separate report from the Realtors.
The group's figures on September existing home sales are due Oct. 24. Purchases in August fell 2.2 percent to a 4.91 million annual pace from a 5 million rate the prior month.
Bank seizures may push down home prices further, scaring away buyers in coming months. U.S. foreclosures rose at the fastest rate in almost three decades, to a record 2.75 percent of all mortgages, in the second quarter, according to the Mortgage Bankers Association in Washington.
Foreclosures
A RealtyTrac Foreclosure report released last month showed home foreclosures rose 26.7 percent in August from a year earlier. An estimated one in every 416 homes is in some stage of foreclosure, the report said.
The number of previously owned homes on the market at the end of August represented 10.4 months' worth at the current sales pace, down from 10.9 months the prior month, NAR said on Sept. 24. A five to six months' supply reflects a stable market, the group has said.
The Fed lowered its benchmark interest rate to 1.5 percent, with similar cuts by the European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank. The Bank of Japan, which didn't participate in the move, said it supported the action.
``The months' supply of new homes for sale remained extremely elevated relative to the level that prevailed before the downturn in the housing market,'' Fed officials said in the minutes the Federal Open Market Committee meeting on Sept. 16, released yesterday in Washington. ``Tight conditions in mortgage markets over the summer continued to restrain housing demand.''
Values Drop
Home prices in 20 U.S. metropolitan areas fell 16.4 percent in July from a year earlier, the most since records began in 2001, the S&P/Case-Shiller home-price index showed on Sept. 30.
The U.S. Treasury Department is setting up a $700 billion program aimed at shoring up the financial system and freeing up more credit by purchasing illiquid assets from troubled firms. Congress approved the plan and President George W. Bush signed the measure into law on Oct 3.
Homebuilders are struggling as fewer potential buyers are able to secure financing. Lennar Corp., the second-largest U.S. homebuilder, last month reported its sixth straight quarterly loss.
``Consensus is building that falling home prices are not only detrimental to the economy at large but in order to repair our failing financial system we will have to stop the decline,'' Stuart Miller, chief executive officer of the Miami-based company, said on a conference call with analysts on Sept. 23.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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Oct. 8 (Bloomberg) -- More Americans unexpectedly signed contracts in August to purchase previously owned homes as mounting foreclosures pushed down prices, making homes more affordable.
The index of pending home resales rose 7.4 percent, the most since October 2001, after falling 2.7 percent in July, the National Association of Realtors said today in Washington. The increase is the fourth so far this year.
Purchases ``have apparently been boosted by sales of heavily discounted foreclosed homes,'' James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, said before the report. ``Still, we expect even existing home sales will fall somewhat further, reflecting an intensifying credit crunch and broad-based weakening in the economy.''
The Federal Reserve and other central banks today cut interest rates as part of a coordinated effort to help ease credit concerns amid the worst financial crisis since the Great Depression. Still, with concern that property values will keep sinking and foreclosures will mount, banks remain reluctant to lend to potential homebuyers.
Economists projected the index would fall 1.3 percent, according to the median of 38 forecasts in a Bloomberg News survey. Estimates ranged from a drop of 3.2 percent to a 4 percent gain.
Pending resales were up 8.8 percent from August 2007.
Regional Breakdown
All four regions saw pending sales increase from July. The West, an area where foreclosures are particularly prevalent, saw the biggest rise in pending sales with an 18.4 percent jump. Resales climbed 8.4 percent in the Northeast, 3.6 percent in the Midwest and 2.3 percent in the South.
Compared with a year ago, pending resales were up in all regions except the South.
Pending resales are considered a leading indicator because they track contract signings. Closings, which typically occur a month or two later, are tallied in a separate report from the Realtors.
The group's figures on September existing home sales are due Oct. 24. Purchases in August fell 2.2 percent to a 4.91 million annual pace from a 5 million rate the prior month.
Bank seizures may push down home prices further, scaring away buyers in coming months. U.S. foreclosures rose at the fastest rate in almost three decades, to a record 2.75 percent of all mortgages, in the second quarter, according to the Mortgage Bankers Association in Washington.
Foreclosures
A RealtyTrac Foreclosure report released last month showed home foreclosures rose 26.7 percent in August from a year earlier. An estimated one in every 416 homes is in some stage of foreclosure, the report said.
The number of previously owned homes on the market at the end of August represented 10.4 months' worth at the current sales pace, down from 10.9 months the prior month, NAR said on Sept. 24. A five to six months' supply reflects a stable market, the group has said.
The Fed lowered its benchmark interest rate to 1.5 percent, with similar cuts by the European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank. The Bank of Japan, which didn't participate in the move, said it supported the action.
``The months' supply of new homes for sale remained extremely elevated relative to the level that prevailed before the downturn in the housing market,'' Fed officials said in the minutes the Federal Open Market Committee meeting on Sept. 16, released yesterday in Washington. ``Tight conditions in mortgage markets over the summer continued to restrain housing demand.''
Values Drop
Home prices in 20 U.S. metropolitan areas fell 16.4 percent in July from a year earlier, the most since records began in 2001, the S&P/Case-Shiller home-price index showed on Sept. 30.
The U.S. Treasury Department is setting up a $700 billion program aimed at shoring up the financial system and freeing up more credit by purchasing illiquid assets from troubled firms. Congress approved the plan and President George W. Bush signed the measure into law on Oct 3.
Homebuilders are struggling as fewer potential buyers are able to secure financing. Lennar Corp., the second-largest U.S. homebuilder, last month reported its sixth straight quarterly loss.
``Consensus is building that falling home prices are not only detrimental to the economy at large but in order to repair our failing financial system we will have to stop the decline,'' Stuart Miller, chief executive officer of the Miami-based company, said on a conference call with analysts on Sept. 23.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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Fed, ECB, Central Banks Cut Rates in Coordinated Move
By Scott Lanman
Oct. 8 (Bloomberg) -- The Federal Reserve, European Central Bank and four other central banks lowered interest rates in an unprecedented coordinated effort to ease the economic effects of the worst financial crisis since the Great Depression.
The Fed, ECB, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point. The Bank of Japan, which didn't participate in the move, said it supported the action. Switzerland also took part. Separately, China's central bank lowered its key one-year lending rate by 0.27 percentage point.
``We are now looking at the first page of the global- depression playbook,'' said Carl Weinberg, chief economist at High Frequency Economics LLC in Valhalla, New York. ``The only solution is to cut rates as close to zero as you dare,'' pump money into the banking system ``hand over fist'' and increase government spending, he said.
Today's decision follows a global meltdown that sent U.S. stock indexes heading for their biggest annual decline since 1937; Japan's benchmark today had the worst drop in two decades. Policy makers are also aiming to unfreeze credit markets after the premium on the three-month London interbank offered rate over the Fed's main rate doubled in two weeks to a record.
Rate Levels
The Fed reduced its benchmark rate to 1.5 percent. The ECB's main rate is now 3.75 percent; Canada's fell to 2.5 percent; the U.K.'s rate dropped to 4.5 percent; and Sweden's rate declined to 4.25 percent. China cut interest rates for the second time in three weeks, reducing the main rate to 6.93 percent.
Stocks at first rallied after the announcement, then turned lower before rising again. Some analysts said the central banks should have lowered rates by more, and predicted further reductions. Economists at Goldman Sachs Group Inc. and Morgan Stanley now project another half-point move by the Fed at its Oct. 28-29 meeting.
The Standard & Poor's 500 Stock Index rose 1 percent to 1,006.63 at 10:17 a.m. in New York, after plummeting 15 percent in the past five trading days. Europe's Dow Jones Stoxx 600 Index slumped 3.9 percent after a drop of as much as 7.8 percent. Japan's Nikkei 225 Stock Average lost 9.4 percent to 9,203.32 earlier today, before the announcement.
``The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability,'' the central banks said in a joint statement today. ``Some easing of global monetary conditions is therefore warranted.''
World Recession
Global policy makers are reducing rates as economies weaken around the world. The International Monetary Fund said the global economy is heading for a recession in 2009 and increased its estimate of losses from the financial crisis to $1.4 trillion.
The crisis already prompted the U.S. to enact a $700 billion program to buy troubled assets from banks in an effort to prop them up. U.K. banks will get a 50 billion-pound ($87 billion) government bailout, while Spain will spend as much as 50 billion euros to buy bank assets. European governments have also moved to rescue banks Fortis, Dexia SA and Hypo Real Estate Holding AG.
The Fed's Open Market Committee, which voted unanimously for today's move, said in its statement that ``incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial-market turmoil is likely to exert additional restraint on spending.''
Europe's Reversal
European policy makers were forced into action after the collapse of Lehman Brothers Holdings Inc. last month roiled world financial markets and caught them off guard. The ECB raised rates in July and Bank of England Governor Mervyn King warned the government as recently as Sept. 16 that inflation was set to accelerate.
The decision to let Lehman go ``had enormous, very unfortunate consequences,'' European Central Bank President Jean- Claude Trichet said Oct. 2. On the same day, he signaled the ECB was ready to cut rates.
Today's action comes a day after Fed Chairman Ben S. Bernanke failed to assuage investors' concerns about the deteriorating economy by signaling he was ready to lower borrowing costs.
Fed officials, who have kept their benchmark rate at 2 percent since April, may have wanted time for their record loans to the financial industry and new programs, including purchases of commercial paper, to bear fruit before lowering rates. Investors instead perceive the economic outlook deteriorating more rapidly, necessitating rate reductions.
Emergency Actions
The declines in U.S. shares the past two days followed pre- market opening announcements of fresh actions by the Fed to unblock credit markets. On Oct. 6, the U.S. central bank doubled its planned auctions of cash to banks to as much as $900 billion. Yesterday, it unveiled a unit to buy commercial paper, debt used by companies for short-term funding.
Central bankers acted two days before they gather with finance ministers from the Group of Seven industrial nations in Washington. The timing suggests the central banks sought to avoid any appearance of being influenced by governments, said Ted Truman, former chief of the Fed's international-finance division.
``It was clear that if they wanted to do it, they had to do it before Friday,'' said Truman, now a senior fellow at the Peterson Institute for International Economics in Washington. ``they don't want to see as being coordinated by their finance ministers into doing this.''
Bernanke Message
Bernanke said in a speech yesterday that an intensifying credit crunch means officials must ``consider'' lowering borrowing costs.
In more typical market conditions, stocks rally when a Fed chief indicates he'll reduce rates. Now, Bernanke's message may have less power because traders already anticipated for weeks that policy makers would need to make that move, and because of rising concern even rate cuts may do little to immediately help banks scrambling to reduce their vulnerability to loan losses.
``This is an extraordinary circumstance,'' said Former Fed Governor Laurence Meyer, now vice chairman of Macroeconomic Advisers LLC. ``If markets are totally frozen it doesn't help. It certainly builds confidence psychologically.''
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net
Read more...
Oct. 8 (Bloomberg) -- The Federal Reserve, European Central Bank and four other central banks lowered interest rates in an unprecedented coordinated effort to ease the economic effects of the worst financial crisis since the Great Depression.
The Fed, ECB, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point. The Bank of Japan, which didn't participate in the move, said it supported the action. Switzerland also took part. Separately, China's central bank lowered its key one-year lending rate by 0.27 percentage point.
``We are now looking at the first page of the global- depression playbook,'' said Carl Weinberg, chief economist at High Frequency Economics LLC in Valhalla, New York. ``The only solution is to cut rates as close to zero as you dare,'' pump money into the banking system ``hand over fist'' and increase government spending, he said.
Today's decision follows a global meltdown that sent U.S. stock indexes heading for their biggest annual decline since 1937; Japan's benchmark today had the worst drop in two decades. Policy makers are also aiming to unfreeze credit markets after the premium on the three-month London interbank offered rate over the Fed's main rate doubled in two weeks to a record.
Rate Levels
The Fed reduced its benchmark rate to 1.5 percent. The ECB's main rate is now 3.75 percent; Canada's fell to 2.5 percent; the U.K.'s rate dropped to 4.5 percent; and Sweden's rate declined to 4.25 percent. China cut interest rates for the second time in three weeks, reducing the main rate to 6.93 percent.
Stocks at first rallied after the announcement, then turned lower before rising again. Some analysts said the central banks should have lowered rates by more, and predicted further reductions. Economists at Goldman Sachs Group Inc. and Morgan Stanley now project another half-point move by the Fed at its Oct. 28-29 meeting.
The Standard & Poor's 500 Stock Index rose 1 percent to 1,006.63 at 10:17 a.m. in New York, after plummeting 15 percent in the past five trading days. Europe's Dow Jones Stoxx 600 Index slumped 3.9 percent after a drop of as much as 7.8 percent. Japan's Nikkei 225 Stock Average lost 9.4 percent to 9,203.32 earlier today, before the announcement.
``The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability,'' the central banks said in a joint statement today. ``Some easing of global monetary conditions is therefore warranted.''
World Recession
Global policy makers are reducing rates as economies weaken around the world. The International Monetary Fund said the global economy is heading for a recession in 2009 and increased its estimate of losses from the financial crisis to $1.4 trillion.
The crisis already prompted the U.S. to enact a $700 billion program to buy troubled assets from banks in an effort to prop them up. U.K. banks will get a 50 billion-pound ($87 billion) government bailout, while Spain will spend as much as 50 billion euros to buy bank assets. European governments have also moved to rescue banks Fortis, Dexia SA and Hypo Real Estate Holding AG.
The Fed's Open Market Committee, which voted unanimously for today's move, said in its statement that ``incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial-market turmoil is likely to exert additional restraint on spending.''
Europe's Reversal
European policy makers were forced into action after the collapse of Lehman Brothers Holdings Inc. last month roiled world financial markets and caught them off guard. The ECB raised rates in July and Bank of England Governor Mervyn King warned the government as recently as Sept. 16 that inflation was set to accelerate.
The decision to let Lehman go ``had enormous, very unfortunate consequences,'' European Central Bank President Jean- Claude Trichet said Oct. 2. On the same day, he signaled the ECB was ready to cut rates.
Today's action comes a day after Fed Chairman Ben S. Bernanke failed to assuage investors' concerns about the deteriorating economy by signaling he was ready to lower borrowing costs.
Fed officials, who have kept their benchmark rate at 2 percent since April, may have wanted time for their record loans to the financial industry and new programs, including purchases of commercial paper, to bear fruit before lowering rates. Investors instead perceive the economic outlook deteriorating more rapidly, necessitating rate reductions.
Emergency Actions
The declines in U.S. shares the past two days followed pre- market opening announcements of fresh actions by the Fed to unblock credit markets. On Oct. 6, the U.S. central bank doubled its planned auctions of cash to banks to as much as $900 billion. Yesterday, it unveiled a unit to buy commercial paper, debt used by companies for short-term funding.
Central bankers acted two days before they gather with finance ministers from the Group of Seven industrial nations in Washington. The timing suggests the central banks sought to avoid any appearance of being influenced by governments, said Ted Truman, former chief of the Fed's international-finance division.
``It was clear that if they wanted to do it, they had to do it before Friday,'' said Truman, now a senior fellow at the Peterson Institute for International Economics in Washington. ``they don't want to see as being coordinated by their finance ministers into doing this.''
Bernanke Message
Bernanke said in a speech yesterday that an intensifying credit crunch means officials must ``consider'' lowering borrowing costs.
In more typical market conditions, stocks rally when a Fed chief indicates he'll reduce rates. Now, Bernanke's message may have less power because traders already anticipated for weeks that policy makers would need to make that move, and because of rising concern even rate cuts may do little to immediately help banks scrambling to reduce their vulnerability to loan losses.
``This is an extraordinary circumstance,'' said Former Fed Governor Laurence Meyer, now vice chairman of Macroeconomic Advisers LLC. ``If markets are totally frozen it doesn't help. It certainly builds confidence psychologically.''
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net
Read more...
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