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Federal Reserve Cuts Rate Again

November 1, 2007

The Federal Open Market Committee (FOMC) lowered its target for the federal funds rate 25 basis points to 4.5 percent.

This cut, which took place during the FOMC meeting on Oct. 31, aimed to promote continued economic growth, which was solid in the third quarter. The pace of economic expansion is expected to slow in the near term, making this cut and the rate cut in September necessary actions to prevent some of the adverse effects on the economy that could result.

Some risk of inflation still remains, so the FOMC will continue to monitor inflation developments. It will also continue to assess the effects of economical developments and will act as needed to aid in price stability and sustainable economic growth.

In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 5 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Richmond, Atlanta, Chicago, St. Louis and San Francisco.

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