*EPF309 01/28/2004
Text: Federal Reserve Group Keeps Key U.S. Interest Rate Low
(But alters language on future intentions) (500)

The policymaking group of the Federal Reserve, the U.S. central bank, has voted unanimously to keep its key interest rate at the lowest level since 1958 on evidence that the U.S. economy is on the rebound.

In a January 28 statement the Federal Open Market Committee (FOMC) said it decided to keep the federal funds rate -- the rate banks charge each other for overnight loans -- at 1 percent.

While in general the statement was very similar to the one issued after the FOMC's December 9 meeting, the committee used different language to describe its intention for the future.

Previously, the FOMC expressed belief that its policy of low interest rates could be maintained for a "considerable period," the phrase it has repeated since August 2003. Now, it says the "committee believes that it can be patient in removing its policy accommodation."

The funds rate has been kept at the current level since June when the committee lowered it to 1 percent.

The FOMC said that while the market indicators confirm that the economy is expanding "briskly" and the labor market is improving, new hiring remains "subdued."

Despite the economy expanding at an impressive annual rate of 8.2 percent in the third quarter of 2003, payroll growth was flat in December following increases in the previous 4 months, according to the Labor Department. And while the unemployment rate dropped to 5.7 percent in December from 5.9 percent in November, labor market analysts ascribed the change to the fact that thousands of potential workers stopped looking for jobs.

Following is the text of the FOMC statement:

(begin text)

Federal Reserve Board

Press Release
January 28, 2004

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 1 percent.

The Committee continues to believe that an accommodative stance of monetary policy, coupled with robust underlying growth in productivity, is providing important ongoing support to economic activity. The evidence accumulated over the intermeeting period confirms that output is expanding briskly. Although new hiring remains subdued, other indicators suggest an improvement in the labor market. Increases in core consumer prices are muted and expected to remain low.

The Committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. The probability of an unwelcome fall in inflation has diminished in recent months and now appears almost equal to that of a rise in inflation. With inflation quite low and resource use slack, the Committee believes that it can be patient in removing its policy accommodation.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Thomas M. Hoenig; Donald L. Kohn; Cathy E. Minehan; Mark W. Olson; Sandra Pianalto; and William Poole.

(end text)

(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

Return to Public File Main Page

Return to Public Table of Contents