FOMC Leaves Interest Rates Steady
August 5, 2008
The Federal Reserve has decided to leave the Fed Funds rate unchanged at 2.00%, in line with market expectations. There were no surprises that the statement referred to the “tighter credit conditions, the ongoing housing correction, and elevated energy prices are likely to weigh on economic growth”. The market wanted to get clarification on the role of inflation in monetary policy and the FOMC added that they expect inflation to moderate later this year and next year but the outlook was “highly uncertain”. Overall the statement seemed skewed towards the inflationary concerns but signals a firm neutral policy for now. The U.S. dollar remained largely unchanged as the announcement came as little surprise.