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Release Date: December 16, 2008
For immediate release
The Federal Open Market Committee decided today to establish a target range for the federal funds
rate of 0 to 1/4 percent.
Since the Committee's last meeting, labor market conditions have deteriorated, and the available
data indicate that consumer spending, business investment, and industrial production have declined.
Financial markets remain quite strained and credit conditions tight. Overall, the outlook for
economic activity has weakened further.
Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices
of energy and other commodities and the weaker prospects for economic activity, the Committee
expects inflation to moderate further in coming quarters.
The Federal Reserve will employ all available tools to promote the resumption of sustainable
economic growth and to preserve price stability. In particular, the Committee anticipates that weak
economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some
time.
The focus of the Committee's policy going forward will be to support the functioning of financial
markets and stimulate the economy through open market operations and other measures that sustain
the size of the Federal Reserve's balance sheet at a high level. As previously announced, over the
next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgagebacked securities to provide support to the mortgage and housing markets, and it stands ready to
expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The
Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.
Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan
Facility to facilitate the extension of credit to households and small businesses. The Federal
Reserve will continue to consider ways of using its balance sheet to further support credit markets
and economic activity.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M.
Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra
Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.
In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the
discount rate to 1/2 percent. In taking this action, the Board approved the requests submitted by the
Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Richmond, Atlanta,
Minneapolis, and San Francisco. The Board also established interest rates on required and excess
reserve balances of 1/4 percent.