The Federal Open Market Committee voted today to keep the target federal funds rate at 5.25%. Here's a summary of the differences between today's Press Release and the Press Release from the previous meeting:
1. The Committee added the word "substantial" to its description of the housing market slowdown.
2. The new statement recognizes that "recent indicators have been mixed," but still says, as before, that the economy is "likely to expand at a moderate pace" with the added qualification "on balance over coming quarters."
3. Jeffrey M. Lacker continued his dissent, voting against the proposal to leave rates unchanged. He prefers an increase in the target rate.
4. The Committee notes, as it did last meeting, that inflation risks remain and further rate moves will depend upon how these risks play out. It does not mention risks to economic growth explicitly as it does with inflation. For example, it talks about "The extent and timing of any additional firming that may be needed," but not about the potential for easing.
Overall, except for the acknowledgment that housing is slowing substantially, not much difference from the last statement. Thus, the Fed will continue in its data dependent mode.
Here's the current Press Release along with the previous statement for comparison. The highlighting has been added to emphasize the differences in the two statements:
|December 12 Meeting||October 25 Meeting|
|For immediate release
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
|Economic growth has slowed over the course of the year, partly reflecting a substantial cooling of the housing market. Although recent indicators have been mixed, the economy seems likely to expand at a moderate pace on balance over coming quarters.||Economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market. Going forward, the economy seems likely to expand at a moderate pace.|
|Readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.||Identical|
|Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.||Identical|
|Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; William Poole; Kevin M. Warsh; and Janet L. Yellen. Voting against was Jeffrey M. Lacker, who preferred an increase of 25 basis points in the federal funds rate target at this meeting.||Identical|