05 August 2008 19:43 [Source: ICIS news]
“Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters,” the committee said.
In “Fed-speak” terms that are likely to be seen as favouring an extended run for the 2% rate, the committee said, “Over time, the substantial easing of monetary policy [rate cuts], combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.”
The Fed noted that while inflationary pressures remain high, driven in large part by high prices for energy products and other commodities, the committee “expects inflation to moderate later this year and next year”.
While the downside risks to US economic growth appear to be the main near-term focus of the Fed, the committee statement also noted that “the upside risks to inflation are also of significant concern”.
At its earlier monetary policy meeting on 25 June, the Fed also held the federal funds rate at 2%, ending a series of seven straight cuts.
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