Fed Stands Pat at 2%
The Federal Open Market Committee announced today that it would keep the Fed funds rate at 2%. The vote was unanimous.
The FOMC said that “strains in financial makets (had) increased significantly.” The committee also noted continued tight credit conditions as a weight on growth, but reaffirmed its faith in its current policy of moderate financial accommodation..
The initial market reaction was muted, with a bias toward the downside. Stocks were mixed before the announcement and have begun to move lower in the minutes following the FOMC decision. The Fed funds futures market had begun to anticipate that the FOMC would in fact cut rates by 25 basis points.
The last move of the Committee was to lower the Fed funds rate from 2.25% to 2.0% in April, 2008. The vote was 8-2
One year ago this week, the FOMC unanimously slashed the Fed funds rate by 50 basis points to 4.75%. The move was among the FOMC’s first in response to the growing mortgage crisis in the fall of 2007.
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