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FOMC Meeting Update:
Next FOMC Meeting: September 16, 2008
Federal Funds Target Rate: 2.00%
The implied Fed Funds rate based on recent trading on the futures contract at the Chicago Board of Trade:
September 2008: 2.01%
October 2008: 2.03%
December 2008: 2.04%
January 2009: 2.08%
February 2009: 2.15%
March 2009: 2.20%
April 2009: 2.25%
May 2009: 2.35%
June 2009: 2.40%
Board of Governors Chairman: Ben Bernanke
FOMC Members: Timothy Geithner, Thomas Hoenig, Donald Kohn, Randall Kroszner, Frederic Mishkin, William Poole, Kevin Warsh, Charles Evans, Eric Rosengren
Federal Reserve Update
Recent speeches by Fed officials indicate that the Fed has tipped the scale towards the risk of inflation in the economy outweighing the risks of economic slowdown. Despite the aggressive rate cuts by the Fed earlier this year, Bernanke, Kohn, and other Fed officials have made strong comments about defending the US dollar and protecting the US economy against inflation. The Fed has also been quick to highlight that the inflation we see in food and energy prices has not caused inflation in other sectors - comments that lead some Fed watchers to believe that the Fed can hold off on any rate increases until inflation is more widespread. The Fed is expected to hold rates steady at their next meeting.
The Bernanke Fed
Fed chairman Ben Bernanke has led one of the most aggressive (if not the most aggressive) Federal Reserve Boards in the history of the central bank. Bernanke's Fed has led the fight against economic turmoil with two 75-point rate cuts among other rate cuts since August, reduced the rate at which direct loans to commercial banks are made and allowed non-banks to borrow from the same entity, has provided Fed loans to Wall Street brokerage firms, and dramatically orchestrated the rescue of Bear Stearns wtih a $29 billion loan backed by Bear Stearn's mortgage-backed securities. The Bernanke Fed may become even more powerful as a financial watchdog over the entire US financial system if a plan proposed by the Treasury Department is adopted. Bernanke, as an academic scholar of the depression of the 1930s, has justified the aggressive positioning of the Fed as a necessity to prevent further economic turmoil, while some critics including former Fed Chairman Paul Volcker question the long reach of the new Bernanke-led Fed.
Money-rates.com Forecast: Federal Funds Rate 2008
The Federal Funds rate is the benchmark overnight lending rate targeted by the Federal Reserve. Fed officials use the fed funds rate to attempt to keep inflation in their targeted range of 1% to 2%. The latest figures released by the Commerce Department showed a year-to-year increase in inflation (CPI index) well below the target range 2.00%, although statements by Fed officials continue to indicate they are very watchful for inflation to exceed the targeted range later in 2008. As more inflation in the economy is reported in 2008 and into 2009 expect the Fed to react by slowly raising interest rates. Listed below is the money-rates.com forecast for the Fed Funds rate in 2008:
October 2008: 2.0%
December 2008: 2.00%
February 2009: 2.25%
Federal Reserve Links:
Members of the Federal Reserve Board of Governors
Speeches and Testimony by Federal Reserve Board Members
Statistics: Releases and Historical Data
Historical interest rate changes
Posted 8/18/08
