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ACTION BY THE FEDERAL OPEN MARKET COMMITTEE AND AN INCREASE IN THE DISCOUNT RATE.

The Federal Open Market Committee voted on March 21, 2000, to raise its target for the federal funds rate by 25 basis points to 6 percent. In a related action, the Board of Governors approved a 25 basis point increase in the discount rate to 51/2 percent.

Economic conditions and considerations addressed by the Committee are essentially the same as when the Committee met in February. The Committee remains concerned that increases in demand will continue to exceed the growth in potential supply, which could foster inflationary imbalances that would undermine the economy's record economic expansion.

Against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the Committee believes the risks are weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future.

In taking the discount rate action, the Federal Reserve Board approved 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, and San Francisco. Subsequently the Board approved a similar request by the board of directors of the Federal Reserve Bank of Dallas, effective March 23. The discount rate is the rate charged depository institutions when they borrow short-term adjustment credit from their District Federal Reserve Banks.
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Publication:Federal Reserve Bulletin
Article Type:Brief Article
Geographic Code:1USA
Date:May 1, 2000
Words:220
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