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Summary

The Federal Open Market Committee (FOMC) decided on March 18, 2008, to lower the target rate for federal funds to 2�% from 3�%, its third reduction in less than a month. This is the sixth consecutive reduction since September 18, 2007. In a public statement issued at the conclusion of its meeting, the FOMC made several observations that describe its current thinking: (1) the economic outlook has weakened further with a slowing of growth in consumer spending and a softening of labor markets; (2) financial markets remain under considerable stress with the tightening of credit conditions and a faltering housing market weighing on economic growth in coming quarters; and (3) while inflation has been elevated and some indicators of inflationary expectations have risen, inflation is expected to moderate over coming quarters. The FOMC concluded with the opinion that future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth. The Board of Governors also reduced the discount rate for primary credit to 2�% from 3�% (on March 16, the Board had approved a cut in the discount rate to 3�% from 3�%). The next meeting of the FOMC is set for April 29-30, 2008. This report will be updated as events warrant.

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