Federal Open Market Committee statements.The Federal Open Market Committee Federal Open Market Committee (FOMC FOMC - Federal Open Market Committee (policy-making arm of the Federal Reserve Bank) The body that is responsible for setting the interest rates and credit policies of the Federal Reserve System. decided on February 2, 2005, to raise its target for the federal funds rate FOMC - Fell Off My Chair FOMC - Fort McHenry National Monument and Historic Shrine (US National Park Service)) 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). 25 basis points Basis point In the bond market, the smallest measure used for quoting yields is a basis point. Each percentage point of yield in bonds equals 100 basis points. Basis points also are used for interest rates. An interest rate of 5% is 50 basis points higher than an interest rate of 4.5%. Sometimes referred to as BPS, BIPS, and pronounced "Bips", to 2 1/2 percent. The Committee believes that, even after this action, the stance of monetary policy Monetary Policy The actions of a central bank, currency board, or other regulatory committee, that determine the size and rate of growth of the money supply, which in turn affects interest rates.Notes: In the United States, the Federal Reserve is in charge of monetary policy. See also: Discount Rate, Fed Funds Rate, Federal Reserve, Fiscal Policy, Interest Rates, Money Supply, Moral Suasion, Open Market Operations, Reflation remains accommodative accommodative /ac·com·mo·da·tive/ (ah-kom´ah-da?tiv) pertaining to, of the nature of, or affecting accommodation.ac·com·mo·da·tive (  -k and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Output appears to be growing at a moderate pace despite the rise in energy prices, and labor market conditions continue to improve gradually. Inflation and longer-term inflation expectations remain well contained. The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters to be roughly equal. With underlying inflation expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability. Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Jack Guynn; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Anthony M. Santomero; and Gary H. Stern. In a related action, the Board of Governors unanimously approved a 25-basis-point increase 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, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. The Federal Open Market Committee decided on March 22, 2005, to raise its target for the federal funds rate 25 basis points, to 2 3/4 percent. The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Output evidently continues to grow at a solid pace despite the rise in energy prices, and labor market conditions continue to improve gradually. Though longer-term inflation expectations remain well contained, pressures on inflation have picked up in recent months and pricing power Pricing Power An economic term referring to the effect that a change in a firm's product price has on the quantity demanded of that product. Pricing power ties in with the "Price Elasticity of Demand."Notes: Generally speaking, if a company doesn't have much pricing power then an increase in their prices would lessen the demand for their products. See also: Economics, Price Elasticity of Demand is more evident. The rise in energy prices, however, has not notably fed through to core consumer prices. The Committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal. With underlying inflation expected to be contained, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability. Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Jack Guynn; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Anthony M. Santomero; and Gary H. Stern. In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate, to 334 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, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, and San Francisco. |
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