WASHINGTON – Federal Reserve policymakers have lowered two key interest rates, each by 0.25 percentage points, the Federal Open Market Committee said in a statement this afternoon.
The FOMC wrapped up its two-day meeting by announcing it has pared its target for the federal funds rate by 25 basis points to 4.50 percent.
“Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance,” the FOMC said in a statement. “However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction.
“Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth. … The Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.”
Voting in favor of the FOMC action were Chairman Ben S. Bernanke, Vice Chairman Timothy F. Geithner and voting members Charles L. Evans, Donald L. Kohn, Randall S. Kroszner, Frederic S. Mishkin, William Poole, Eric S. Rosengren and Kevin M. Warsh. Thomas M. Hoenig voted against the rate reduction, saying he would prefer the funds rate remain unchanged.
Meanwhile, in a related action, the Fed’s Board of Governors unanimously approved a 25-basis-point reduction in the discount rate the rate the central bank charges on direct loans to banks. The rate cut, to 5.0 percent, had been requested by the boards of directors of the Federal Reserve Banks of New York, Richmond, Atlanta, Chicago, St. Louis and San Francisco.
Both the funds rate and the discount rate were pared by the Fed in September, at the time of the FOMC’s last regular meeting. (READ MORE)
Additional information from the Federal Reserve, including the full statement issued today by the Federal Open Market Committee, can be found at www.federalreserve.gov.
