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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 9/20/05 For Aug 2005 | ||||||||||
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Highlights
The Fed did what most economists predicted, they kept their focus on the risk of inflation and once again raised their overnight federal funds policy target by 25 basis points, now to 3.75% with no end of "measured" hikes in sight.
The Fed offered expanded commentary on Hurricane Katrina, saying the devastation from the storm will likely slow activity in the near term as well as add to energy price volatility. But the Fed said the storm does not pose what it called "a more persistent threat." It said its own monetary policy, which it repeated is accommodative, combined with what it still calls "robust" underlying productivity growth, is providing ongoing support for the economy.
Policy makers stressed that inflation remains a risk, and in an important reminder they kept in the word "measured" to describe future rate hikes. And like their prior statement Aug. 9, the committee said it would respond to changes in economic prospects as needed, specifically, to keep inflation in check.
Bonds dipped sharply in reaction to the statement. Remember interest rates began to fall soon following Katrina on suspicions the Fed, wanting to stimulate rebuilding, would suspend its rate-hike cycle. Interest rates in the Treasury market may now begin to back up over the coming sessions. Today's statement sets terms for the global financial markets over the next several weeks, pending the jobs report on Oct. 7 and provided that oil prices don't soar again.
Market players and economists are divided on what the Fed should do - and will do at the September 20 FOMC meeting. Some believe that a momentary pause would be good for the economy; others believe that the Fed should remain vigilant in their fight against inflation - particularly since Congress and the administration has targeted specific funds for rebuilding efforts. The majority of economists are currently expecting the Fed to raise rates on Tuesday.
Federal funds rate target Consensus Forecast for Sept 20 05: 3.75 percent (+0.25 percent)
Range: 3.50 to 3.75 percent
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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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