Fed Stands Pat

May 7, 2002 (PLANSPONSOR.com) - Members of the Federal Open Market Committee kept their target for the federal funds rate, the rate at which banks lend to banks overnight, unchanged at 1.75%.

While the Federal Reserve conceded in a statement that, “economic activity has been receiving considerable upward impetus from a marked swing in inventory investment,” it noted that it remained concerned about the uncertain outlook for final demand.

Indeed, investors have been faced with a host of conflicting economic data showing, on the one hand, GDP increasing at a rate of 5.8% and significant gains in productivity over the first quarter, and on the other, the unemployment rate at 6% and consumer confidence in the doldrums.

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Policymakers noted that the risks between inflation and a flat growth rate remained balanced and that current monetary policy was “accommodative”.