FOMC actions and discount rate changes. (Announcements).The Federal Open Market Committee Federal Open Market Committee (FOMC) The body that is responsible for setting the interest rates and credit policies of the Federal Reserve System. decided on October 2, 2001, to lower its target for the federal funds rate Federal Funds Rate The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.Notes: This is what news reports are referring to when they talk about the Fed changing interest rates. In fact, the FOMC sets a target for this rate, but not the actual rate itself (because it is determined by the open market). by 50 basis points to 2 1/2 percent. In a related action, the Board of Governors approved a 50 basis point reduction in the discount rate Discount Rate 1. The interest rate that an eligible depository institution is charged to borrow short-term funds directly from a Federal Reserve Bank.2. The interest rate used in determining the present value of future cash flows. Notes: 1. This type of borrowing from the Fed is fairly limited. Institutions will often seek other means of meeting short-term liquidity needs. to 2 percent. The terrorist attacks have significantly heightened uncertainty in an economy that was already weak. Business and household spending as a consequence are being further damped. Nonetheless, the long-term prospects for productivity growth and the economy remain favorable and should become evident once the unusual forces restraining demand abate abate v. to do away with a problem, such as a public or private nuisance or some structure built contrary to public policy. This can include dikes which illegally direct water onto a neighbors property, high volume noise from a rock band or a factory, an improvement constructed in violation of building and safety codes, or seepage from a faulty septic tank. (See: abatement). The Committee continues to believe that, against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future. In taking the discount rate action, the Federal Reserve Board Federal Reserve Board (FRB) The seven-member governing body of the Federal Reserve System, which is responsible for setting reserve requirements, and the discount rate, and making other key economic decisions. also approved the discount rate requests submitted by the boards of directors of the Federal Reserve Banks of Boston, New York, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Kansas City, Dallas, and San Francisco. The Federal Reserve Board on October 3, 2001, approved action by the board of directors of the Federal Reserve Bank of Minneapolis, decreasing the discount rate at the bank from 2 1/2 percent to 2 percent, effective immediately. The Federal Reserve Board on October 4, 2001, approved action by the board of directors of the Federal Reserve Bank of Philadelphia, decreasing the discount rate at the bank from 2 1/2 percent to 2 percent, effective immediately. |
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