Fed Steady – But Not Unanimous

September 24, 2002 (PLANSPONSOR.com) - As expected, the Federal Reserve left short-term interest rates unchanged, although the vote was not unanimous.

The Federal Open Market Committee (FOMC) decided Tuesday to keep its target for the federal funds rate unchanged at 1¾%.   The FOMC has not touched interest rates at all this year, after cutting rates 11 times in 2001.  

Throughout turbulent markets, both good and not-so-good, Fed Chairman Greenspan has done a remarkable job of leading the Federal Open Market Committee (FOMC) to unanimous votes.   However, in today’s vote Edward M. Gramlich and Robert D. McTeer, Jr. voted against the decision to leave rates unchanged, expressing a preference for a reduction in the federal funds rate.

In its announcement accompanying the decision, the Fed noted that aggregate demand is growing at a “moderate” pace, but acknowledged “considerable uncertainty” regarding the extent and timing of an anticipated pickup in production and employment.   “Heightened geopolitical risks” were cited as contributing to that uncertainty.

As a result, the Fed left the door open for future interest rate cuts, noting that risks continue to be weighted toward weakness in the economy.