Release Date: August 24, 1999 

 For immediate release 

 The Federal Open Market Committee today voted to raise its target for
 the federal funds rate by  25 basis points to 5-1/4 percent. In a 
related action, the Board of Governors approved a 25 basis point 
increase in the discount rate to 4-3/4 percent. 

 With financial markets functioning more normally, and with persistent 
strength in domestic demand,  foreign economies firming and labor 
markets remaining very tight, the degree of monetary ease required to 
address the global financial market turmoil of last fall is no longer 
consistent with  sustained, noninflationary, economic expansion. 

 Today's increase in the federal funds rate, together with the policy 
action in June and the firming of conditions more generally in U.S. 
financial markets over recent months, should markedly diminish
 the risk of rising inflation going forward. As a consequence, the 
directive the Federal Open  Market Committee adopted is symmetrical 
with regard to the outlook for policy over the near term. 

 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, Kansas City, and San Francisco. The 
discount  rate is the interest rate that is charged depository 
institutions when they borrow from their district Federal Reserve 
Banks.