At its May 16 meeting, the Federal Open Market Committee (FOMC) voted to raise the federal funds target rate 50 basis points (bp) to 6.5%. The FOMC began the current round of increases in June 1999 and, until its most recent meeting, had raised the target rate by 25 bp increments in a remarkably steady manner. In fact, the Committee held to this pattern at five of the seven meetings previous to May; one could argue that only extraordinary circumstances, created by the century date change, prevented action at the December 1999 meeting. The Committee’s press release cited potential inflationary imbalances fostered by continued growth in demand, which exceeded “even the rapid pace of productivity-driven gains in potential supply,” as the reason for its more aggressive move of 50 bp.
Suggested citation: "Monetary Policy," Federal Reserve Bank of Cleveland, Economic Trends, no. 00-06, pp. 02-05, 06.01.2000.