The Federal Open Market Committee yesterday decided to lower its target for the federal funds rate 25 basis points to 2%.
Recent information indicates that economic activity remains weak, household and business spending has been subdued, and labor markets have suffered further. Financial markets remain under considerable stress and tight credit conditions, and the deepening housing contraction are likely to weigh on economic growth over the next few quarters, according to the committee.
Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high.