The Federal Open Market Committee (FOMC) decided to lower its Federal Funds Rate target by 25 basis points to 4 ½% and to lower the Discount Rate by 25 basis points to 5%. The decision to lower the Fed Funds Rate had one dissent, and the Discount Rate decision was unanimous.
The Fed left open the possibility of additional interest rate cuts but gave no indication of future action. It also mentioned the improvement in core inflation and the equal balance between upside risks to inflation versus the downside risks to growth.
The primary concern with current Fed actions is that Chairman Bernanke will get caught behind the curve since Fed actions can take several months to a year to take effect. The GDP report this morning indicated that the economy may be more resilient than many believe. Core inflation for the moment also appears to be less of a problem.
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For a quick-read on the U.S. economy, check the price of gasoline
