Further terrorizing American consumers, Fed Chairman Bernanke and fellow FOMC members have cut the fed funds rate another 50 basis points to now total 3%, and the Board of Governors has cut the discount rate to 3.5%. The surprise 75-basis-point cut last week let consumers know that, in case they were unaware, America was in or heading quickly into a recession. The consumers' translation of this message? "We should be careful of our spending...."Oh, boy. Generally, the FOMC has lost another 50 points of power over the U.S. economy. The following is the FOMC's statement, so you'll know. Release Date: January 30, 2008
For immediate releaseThe Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 3 percent. Financial markets remain under considerable stress, and credit has tightened further for some businesses and households. Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets. The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully. Today’s policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks. Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred no change in the target for the federal funds rate at this meeting. In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 3-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, Kansas City, and San Francisco.
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