Fed Leaves Rates Unchanged

For a second straight meeting the FOMC has left interest rates unchanged. The Fed will maintain the Fed Funds rate at 2% and the Discount rate at 2.25%.

The statement accompanying the announcement continued to show the Fed's confusion on whether to fight the financial crisis or inflation:

Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the Committee. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.

Richard Fisher continues to be the sole inflation hawk on the Board.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Fisher, who preferred an increase in the target for the federal funds rate at this meeting.

Federal Reserve Maintains Inflationary Stance On Interest Rates

Below is the Federal Reserve announcement stating that they will keep the Federal Funds at a target rate of 2%. At this interest rate level, M2NSA money supply is growing at a rate of around 10%. Thus, by the Fed keeping interest rates steady at this level, the Fed will most assuredly be required to continue to increase the money supply at the 10% growth rate, if not faster. Only Richard Fisher appears to be any kind of an inflation hawk, as he voted against
the current target rate, and wanted a higher rate:

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.

Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters.

The Committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.

The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time. Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was
Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting.