11 December 2001, 22:21 The full text of the Federal Open Market
The Federal Open Market Committee decided today to lower its target
for the federal funds rate by 25 basis points to 1-3/4 percent. In a
related action, the Board of Governors approved a 25 basis point
reduction in the discount rate to 1-1/4 percent.
Economic activity remains soft, with underlying inflation likely to
edge lower from relatively modest levels. To be sure, weakness in
demand shows signs of abating, but those signs are preliminary and
tentative. The Committee continues to believe that, against the
background of its long-run goals of price stability and sustainable
economic growth and of the information currently available, the risks
are weighted mainly toward conditions that may generate economic
weakness in the foreseeable future.
Although the necessary reallocation of resources to enhance
security may restrain advances in productivity for a time, the
long-term prospects for productivity growth and the economy remain
favorable and should become evident once the unusual forces restraining
demand abate.
In taking the discount rate action, the Federal Reserve Board
approved the requests submitted by the Boards of Directors of the
Federal Reserve Banks of Boston, New York, Philadelphia, Chicago and
San Francisco.
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