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2008 Economic Calendar |
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Resource Center » U.S. & Intl Recaps | Release Dates | Why Investors Care | Today's Calendar
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The Federal Open Market Committee consists of the seven Governors of the Federal Reserve Board and five Federal Reserve Bank presidents. The FOMC meets eight times a year in order to determine the near-term direction of monetary policy. Changes in monetary policy are now announced immediately after FOMC meetings. Why Investors Care
| Released on 8/9/05 For Jul 2005 | ||||||||
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Highlights
Phrases were moved around and a few added but otherwise the Federal Reserve's policy statement this afternoon simply reads: steady as she goes. The Fed raised its policy rate 25 basis points to 3 1/2% and repeated that longer-term inflation expectations remain "well contained" and that pressures on inflation have "stayed elevated" (the latter phrase now placed in front of a 'but' that seems to give it a new emphasis of sorts). Still the Fed added the phrase that inflation has been "relatively low" in recent months.
The Fed's assessment of economic growth is a bit more positive. In June, the Fed described the expansion as firm. The Fed now adds details, saying aggregate spending, indicating here both consumer spending and business investment, "appears to have strengthened since late winter." The Fed repeated that job growth is improving gradually.
Left intact is the Fed's policy description, saying it will continue to "remove accommodation" at a "measured" pace, which means a continuing, uninterrupted series of 25 basis point rate hikes. Financial markets were jostled in initial reaction but showed no clear direction.
The following is the main part of the text:
"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. Aggregate spending, despite high energy prices, appears to have strengthened since late winter, and labor market conditions continue to improve gradually. Core inflation has been relatively low in recent months and longer-term inflation expectations remain well contained, but pressures on inflation have stayed elevated.
"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."
The FOMC meeting is likely to bring a widely anticipated result of a 25 basis point increase in the federal funds rate target. Market players will be more interested in the post-meeting statement. They are looking for the Fed to indicate when they will be ready to stop raising rates. Any change in the statement will be closely scrutinized.
Federal funds rate target Consensus Forecast for Aug 9 05: 3.5 percent (+0.25 percent)
Range: None
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The Fed closely monitors the core PCE deflator to indicate whether or not policy is approximately correct, overly accommodative, or too restrictive. The PCE deflator is prefered to the CPI because it is more closely aligned to the cost of living than the CPI (which measures a fixed basket of goods & services.) |
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