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Monetary Policy

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At its December 9 meeting, the Federal Open Market Committee (FOMC) decided to keep its target federal funds rate at 1%. The press release noted, however, that the FOMC now finds a reduced probability of “an unwelcome fall in inflation.” In line with the October 28 statement, policy accommodation is expected to continue for “a considerable period.” Market expectations may have reacted more strongly to the minutes of the October meeting, which some market observers took to indicate that the target rate would remain at its current level longer than they had previously expected. They were perhaps reacting to the minutes’ statement that FOMC members felt current trends “were likely to hold inflation to very low levels over the next year or two.”

Suggested citation: "Monetary Policy," Federal Reserve Bank of Cleveland, Economic Trends, no. 04-01, pp. 04, 01.01.2004.

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