Discount Rate Reduced by 50 Basis Points
To All Depository Institutions in the Second Federal Reserve District:
At its meeting today, the Federal Open Market Committee (FOMC) decided to lower its target for the federal funds rate by 50 basis points, to 5 percent. In addition, the Board of Governors of the Federal Reserve System approved a 50-basis-point reduction in the discount rate, to 4½ percent; this action was taken upon requests submitted by all 12 Reserve Banks.
In its press release, the FOMC indicated that "the possibility that [the recent emergence of excess productive capacity] could continue for some time and the potential for weakness in global economic conditions suggest substantial risks that demand and production could remain soft. In these circumstances . . . the Federal Reserve will need to monitor developments closely."
