Fed Funds Rate Remains at 1%

March 16, 2004 (PLANSPONSOR.com) - Once again the Federal Reserve has decided against changing interest rates from their decade-old lows.

The Federal Open Market Committee (FOMC) opted to leave the federal funds rate target exactly where it was at the last reading – 1%, according to the FOMC’s end-of-meeeting statement.

In their accompanying comments, the Fed officials spoke to the economy as a whole in their decision.   Commented FOMC members:   “The Committee continues to believe that an accommodative stance of monetary policy, coupled with robust underlying growth in productivity, is providing important ongoing support to economic activity.”   Overall, the committee sees the upside and downside risks as “roughly equal.”  

Returning to talks of inflation that have dominated the FOMC’s statements as of late, the committee sees little chance for an “unwelcome fall in inflation” and thus “the Committee believes that it can be patient in removing its policy accommodation.”

Interest rate policy is important for plan sponsors because many plans’ loan interest rates are tied to the Prime Rate.