The Federal Open Market Committee voted
today to raise its target for the federal funds rate by 25 basis points to
5-3/4 percent. In a related action, the Board of Governors approved a 25
basis point increase in the discount rate to 5-1/4 percent.
The Committee remains concerned that
over time increases in demand will continue to exceed the growth in
potential supply, even after taking account of the pronounced rise in
productivity growth. Such trends could foster inflationary imbalances that
would undermine the economy's record economic expansion.
Against the background of its long-run
goals of price stability and sustainable economic growth and of the
information currently available, the Committee believes the risks are
weighted mainly toward conditions that may generate heightened inflation
pressures in the foreseeable future.
In taking the discount rate action, the
Federal Reserve Board approved requests submitted by the Boards of
Directors of the Federal Reserve Banks of Boston, New York, Philadelphia,
Cleveland, Richmond, Atlanta, Chicago, St. Louis, Kansas City and San
Francisco. The discount rate is the rate charged depository institutions
when they borrow short-term adjustment credit from their district Federal
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Last modified: March 17, 2001
Published By Tulips and Bears