Academic journal article Federal Reserve Bulletin

Federal Open Market Committee Directive

Academic journal article Federal Reserve Bulletin

Federal Open Market Committee Directive

Article excerpt

The Federal Open Market Committee decided on June 25, 2003, to lower its target for the federal funds rate 25 basis points, to 1 percent. In a related action, the Board of Governors approved a 25 basis point reduction in the discount rate, to 2 percent.

The Committee continues to believe that an accommodative stance of monetary policy, coupled with still robust underlying growth in productivity, is providing important ongoing support to economic activity. Recent signs point to a firming in spending, markedly improved financial conditions, and labor and product markets that are stabilizing. The economy, nonetheless, has yet to exhibit sustainable growth. With inflationary expectations subdued, the Committee judged that a slightly more expansive monetary policy would add further support for an economy that it expects to improve over time.

The Committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. In contrast, the probability, though minor, of an unwelcome substantial fall in inflation exceeds that of a pickup in inflation from its already low level. …

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