Tuesday, September 16, 2008

Fed Decides To Leave Rates Unchanged at 2.00%

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2%.

Here are some of their comments:
  • Strains in financial markets have increased significantly and labor markets have weakened further.
  • Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters.
  • Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.
  • Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities.
  • The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.
  • The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee.
  • The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

I thought they should have cut rates, if only because the fed funds rate in the marketplace is trading lower than their target levels. Now that they have not cut rates, let's hope they decide to help out AIG.


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