Over the past several years, the Federal Open Market Committee (FOMC) collectively has seen little basis for taking action. The FOMC last changed the fed funds rate objective in March 1997, increasing it a scant 25 basis points. This increase was preceded by a rate cut of the same magnitude in February 1996. Thus, for almost three years, the FOMC has instructed its Trading Desk to add or drain base money in order to maintain the fed funds rate at or just under 5½%. As recently as the end of August, fed funds futures prices suggested that the outlook for the funds rate was more of the same.
Suggested citation: “Monetary Policy,” Federal Reserve Bank of Cleveland, Economic Trends, no. 98-09, pp. 02-03, 09.01.1998.