Federal Reserve Cuts the Federal Funds Rate
Saturday, May 10, 2008
The federal funds rate has been lowered another 25-basis-points to 2-percent to help the U.S. deal with an economy that is feeling the pinch of energy and commodity prices, The Federal Open Market Committee said on Wednesday.
In addition, the Board of Governors dropped the discount rate 25-basis-points to 2-1/4-percent.
The Federal Reserve Board pointed, once again, to the soft housing market as one of the factors contributing to the rate change.
“Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters,” the Federal Reserve System said in a press statement.
The Board added, “Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high.”
In addition, the Board of Governors dropped the discount rate 25-basis-points to 2-1/4-percent.
The Federal Reserve Board pointed, once again, to the soft housing market as one of the factors contributing to the rate change.
“Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters,” the Federal Reserve System said in a press statement.
The Board added, “Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high.”
