The Federal Open Market
Committee today voted to raise its target for the federal funds rate 25
basis points to 5 percent. Last fall the Committee reduced interest rates
to counter a significant seizing-up of financial markets in the United
States. Since then much of the financial strain has eased, foreign
economies have firmed, and economic activity in the United States has
moved forward at a brisk pace. Accordingly, the full degree of adjustment
is judged no longer necessary.
Labor markets have continued to tighten
over recent quarters, but strengthening productivity growth has contained
Owing to the uncertain resolution of the
balance of conflicting forces in the economy going forward, the FOMC has
chosen to adopt a directive that includes no predilection about near-term
policy action. The Committee, nonetheless, recognizes that in the current
dynamic environment it must be especially alert to the emergence, or
potential emergence, of inflationary forces that could undermine economic
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Last modified: April 06, 2001
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