The Federal Open Market
Committee today voted to raise its target for the federal funds rate by 25
basis points to 5-1/4 percent. In a related action, the Board of Governors
approved a 25 basis point increase in the discount rate to 4-3/4 percent.
With financial markets functioning more
normally, and with persistent strength in domestic demand, foreign
economies firming and labor markets remaining very tight, the degree of
monetary ease required to address the global financial market turmoil of
last fall is no longer consistent with sustained, noninflationary,
Today's increase in the federal funds
rate, together with the policy action in June and the firming of
conditions more generally in U.S. financial markets over recent months,
should markedly diminish the risk of rising inflation going forward. As a
consequence, the directive the Federal Open Market Committee adopted is
symmetrical with regard to the outlook for policy over the near term.
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 interest rate that is charged
depository institutions when they borrow from their district Federal
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Last modified: April 06, 2001
Published By Tulips and Bears