Full Text of the Federal Reserve Statement on Interest Rates - via Bloomberg/edit
By Washington Bureau -0-
Washington, April 18 (Bloomberg) -- Following is the text of a statement by the
Federal Reserve's Open Market Committee on today's decision by the FOMC to
reduce the overnight bank lending rate to 4.5 percent from 5 percent:
The Federal Open Market Committee decided today to lower its target for the
federal funds rate by 50 basis points to 4- 1/2 percent. In a related action, the
Board of Governors approved a 50 basis point reduction in the discount rate to 4
percent.
The FOMC has reviewed prospects for the economy in light of the
information that has become available since its March meeting. A significant
reduction in excess inventories seems well advanced. Consumption and housing
expenditures have held up reasonably well, though activity in these areas has
flattened recently. Although measured productivity probably weakened in the first
quarter, the impressive underlying rate of increase that developed in recent years
appears to be largely intact. Nonetheless, capital investment has continued to
soften and the persistent erosion in current and expected profitability, in
combination with rising uncertainty about the business outlook, seems poised to
dampen capital spending going forward. This potential restraint, together with the
possible effects of earlier reductions in equity wealth on consumption and the
risk of slower growth abroad, threatens to keep the pace of economic activity
unacceptably weak. As a consequence, the Committee agreed that an
adjustment in the stance of policy is warranted during this extended intermeeting
period.
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 approved requests submitted by
the Boards of Directors of the Federal Reserve Banks of Boston, New York,
Philadelphia, Cleveland, Atlanta, Minneapolis, Dallas, and San Francisco.
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My Comment:
As Brinker has pointed out occassionally, what is going to make the consumer spending (& business capital spending) increase to point of more significant economy growth?
The FED is increasing liquidity & lowering short-term rates...but, what will increase confidence enough for the consumer/business to start taking advantage of it? on the other hand, I've read that a number of banks are tightening credit requirements. The continuous litany-of-layoff announcements will not instill confidence in buyers.
You can lead a horse to water, but can you make him drink? - Or as Brinker might say, the FED lowering rates could be like pushing on a rope (i.e., if there is no significant use of the lower cost of borrowing)
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Mr GJ: Your comments, please. |
