History of Federal Open Market Committee actions
Encyclopedia
This is a list of historical rate actions by the United States Federal Open Market Committee
(FOMC). The FOMC controls the supply of credit to banks and the sale of treasury securities. At scheduled meetings, the FOMC meets and makes any changes it sees as necessary, notably to the federal funds rate
and the discount rate
. The committee may also take actions with a less firm target, such as an increasing liquidity by the sale of a set amount of Treasury bonds, or affecting the price of currencies both foreign and domestic by selling dollar reserves (such as during the Mexican peso bailout
in 1994).
craze of the time) began in 1961. The intent was to flatten the yield curve
in order to promote capital inflows and strengthen the dollar. The Fed utilized open market operations to shorten the maturity of public debt in the open market. It performs the 'twist' by selling some of the short term debt (with three years or less to maturity) it purchased as part of the quantitative easing
policy back into the market and using the money received from this to buy longer term government debt. Although this action was marginally successful in reducing the spread
between long-term maturities and short-term maturities, some economists have suggested it did not continue for a sufficient period of time to be effective. Despite being considered a failure in near-term analyses, the action has subsequently been reexamined in isolation and certain economists have suggested it was more effective than originally thought. As a result of this reappraisal, similar action has been suggested as an alternative to quantitative easing
by central bank
s.
's federal reserve increased the Fed Funds rate from 11% to 12% during the weekend (October 6, 1979).
Red dates are intermeeting actions. Blue signifies tightening, green signifies neutrality, and yellow signifies easing.
Federal Open Market Committee
The Federal Open Market Committee , a committee within the Federal Reserve System, is charged under United States law with overseeing the nation's open market operations . It is the Federal Reserve committee that makes key decisions about interest rates and the growth of the United States money...
(FOMC). The FOMC controls the supply of credit to banks and the sale of treasury securities. At scheduled meetings, the FOMC meets and makes any changes it sees as necessary, notably to the federal funds rate
Federal funds rate
In the United States, the federal funds rate is the interest rate at which depository institutions actively trade balances held at the Federal Reserve, called federal funds, with each other, usually overnight, on an uncollateralized basis. Institutions with surplus balances in their accounts lend...
and the discount rate
Discount rate
The discount rate can mean*an interest rate a central bank charges depository institutions that borrow reserves from it, for example for the use of the Federal Reserve's discount window....
. The committee may also take actions with a less firm target, such as an increasing liquidity by the sale of a set amount of Treasury bonds, or affecting the price of currencies both foreign and domestic by selling dollar reserves (such as during the Mexican peso bailout
1994 economic crisis in Mexico
The 1994 Economic Crisis in Mexico, widely known as the Mexican peso crisis, was caused by the sudden devaluation of the Mexican peso in December 1994....
in 1994).
Operation Twist (1961)
The Federal Open Market Committee action known as Operation Twist (named for the Twist danceTwist (dance)
The Twist was a dance inspired by rock and roll music. It became the first worldwide dance craze in the early 1960s, enjoying immense popularity among young people and drawing fire from critics who felt it was too provocative. It inspired dances such as the Jerk, the Pony, the Watusi, the Mashed...
craze of the time) began in 1961. The intent was to flatten the yield curve
Yield curve
In finance, the yield curve is the relation between the interest rate and the time to maturity, known as the "term", of the debt for a given borrower in a given currency. For example, the U.S. dollar interest rates paid on U.S...
in order to promote capital inflows and strengthen the dollar. The Fed utilized open market operations to shorten the maturity of public debt in the open market. It performs the 'twist' by selling some of the short term debt (with three years or less to maturity) it purchased as part of the quantitative easing
Quantitative easing
Quantitative easing is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank buys financial assets to inject a pre-determined quantity of money into the economy...
policy back into the market and using the money received from this to buy longer term government debt. Although this action was marginally successful in reducing the spread
Yield spread
In finance, the yield spread is the difference between the quoted rates of return on two different investments, usually of different credit quality.It is a compound of yield and spread....
between long-term maturities and short-term maturities, some economists have suggested it did not continue for a sufficient period of time to be effective. Despite being considered a failure in near-term analyses, the action has subsequently been reexamined in isolation and certain economists have suggested it was more effective than originally thought. As a result of this reappraisal, similar action has been suggested as an alternative to quantitative easing
Quantitative easing
Quantitative easing is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank buys financial assets to inject a pre-determined quantity of money into the economy...
by central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
s.
Quantitative Easing 1 (QE1)
"On November 25, 2008, the Federal Reserve announced that it would purchase up to $600 billion in agency mortgage-backed securities (MBS) and agency debt. On December 1, Chairman Bernanke provided further details in a speech.6 On December 16, the program was formally launched by the FOMC.7 On March 18, 2009, the FOMC announced that the program would be expanded by an additional $850 billion in purchases of agency MBS and agency debt and $300 billion in purchases of Treasury securities."Operation Twist (2011)
The Federal Open Market Committee concluded its September 21, 2011 Meeting at about 2:15PM EDT by announcing the implementation of Operation Twist. This is a plan to purchase $400 billion of bonds with maturities of 6 to 30 years and to sell bonds with maturities less than 3 years, thereby extending the average maturity of the Fed's own portfolio. This is an attempt to do what Quantitative Easing (QE) tries to do, without printing more money and without expanding the Fed's balance sheet, therefore hopefully avoiding the inflationary pressure associated with QE. This announcement brought a bout of risk aversion in the equity markets and strengthened the US Dollar, whereas QE I had weakened the USD and supported the equity markets.Saturday Night Special
Soon after becoming chairman, Paul VolckerPaul Volcker
Paul Adolph Volcker, Jr. is an American economist. He was the Chairman of the Federal Reserve under United States Presidents Jimmy Carter and Ronald Reagan from August 1979 to August 1987. He is widely credited with ending the high levels of inflation seen in the United States in the 1970s and...
's federal reserve increased the Fed Funds rate from 11% to 12% during the weekend (October 6, 1979).
Historical actions
Currently, this only shows meetings, both scheduled and unscheduled "emergency" meetings. The FOMC makes a number of other important pronouncements as well such as during testimony to Congress whose effects are harder to quantify.Red dates are intermeeting actions. Blue signifies tightening, green signifies neutrality, and yellow signifies easing.
| Date | Fed. Fund Rate | Discount Rate | Votes | Notes |
|---|---|---|---|---|
| Jun 22, 2011 | 0.00–0.25% | 0.75% | X-X | Official Statement |
| Dec 16, 2008 | 0.00–0.25% | 0.50% | 10–0 | Official Statement See also: ZIRP |
| Oct 29, 2008 | 1.00% | 1.25% | 10–0 | Official Statement |
| Oct 8, 2008 | 1.50% | 1.75% | X–X | This was an emergency unscheduled meeting in response to a rapidly weakening economy, made in coordination with several other central banks around the world. Official Statement |
| Apr 30, 2008 | 2.00% | 2.25% | 8–2 | The FOMC cut rates by 25 basis points. They drew back on their easing bias somewhat by removing "downside risks to growth remain" from its statement, but left no sign of a future pause to the interest rate cuts. Fisher Richard W. Fisher Richard W. Fisher is currently the President and CEO of the Federal Reserve Bank of Dallas, having assumed that post in April, 2005.-Career:... and Plosser dissented, preferring no change. Official Statement |
| Mar 18, 2008 | 2.25% | 2.50% | 8–2 | The FOMC made another unusually large cut, slashing 75 basis points off the federal funds rate in response to turmoil in the markets and the collapse of Bear Stearns Bear Stearns The Bear Stearns Companies, Inc. based in New York City, was a global investment bank and securities trading and brokerage, until its sale to JPMorgan Chase in 2008 during the global financial crisis and recession... . Despite some predicting an even larger 100 basis point cut, the markets rallied in response. Fisher Richard W. Fisher Richard W. Fisher is currently the President and CEO of the Federal Reserve Bank of Dallas, having assumed that post in April, 2005.-Career:... and Plosser dissented, preferring a smaller cut. Official Statement |
| Mar 16, 2008 | 3.00% | 3.25% | 10–0 | This was an emergency unscheduled meeting in response to the meltdown at Bear Stearns Bear Stearns The Bear Stearns Companies, Inc. based in New York City, was a global investment bank and securities trading and brokerage, until its sale to JPMorgan Chase in 2008 during the global financial crisis and recession... . The FOMC arranged loan securities for JPMorgan Chase and greased a buyout of Bear Stearns to make certain that Bear's debts would be backed. It also provided for the creation of a fund to swap safe Treasury securities for less secure ones held by banks. It lastly shaved the difference between the discount rate and the federal funds rate from 50 basis points to 25. Official Statement |
| Jan 30, 2008 | 3.00% | 3.50% | 9–1 | Fisher Richard W. Fisher Richard W. Fisher is currently the President and CEO of the Federal Reserve Bank of Dallas, having assumed that post in April, 2005.-Career:... dissented, preferring no change. Official Statement |
| Jan 22, 2008 | 3.50% | 4.00% | 8–1 | This was an intermeeting rate cut held in response to the January stock downturn, with the results announced Tuesday morning before the U.S. market opened. Poole William Poole (Federal Reserve Bank president) William Poole was the eleventh chief executive of the Federal Reserve Bank of St. Louis. He took office on March 23, 1998 and began serving his full term on March 1, 2001. In 2007, he served as a voting member of the Federal Open Market Committee, bringing his District's perspective to policy... dissented, saying that emergency action was not required and could wait for the scheduled meeting. Mishkin Frederic Mishkin Frederic Stanley "Rick" Mishkin is an American economist and professor at the Columbia Business School. He was a member of the Board of Governors of the Federal Reserve System from 2006 to 2008.-Early life and family:... was absent. Official Statement |
| Dec 11, 2007 | 4.25% | 4.75% | 9–1 | Rosengren Eric S. Rosengren Eric S. Rosengren took office on July 23, 2007, as the thirteenth president and chief executive officer of the Federal Reserve Bank of Boston, serving the First District. He serves the remainder of a term that began on March 1, 2006... dissented, preferring a 50 basis point cut. The markets, disappointed with a 25 basis point cut, fell in response; the Fed issued a statement the day after (December 12) pledging an increased money supply to the markets in conjunction with other central banks. Official Statement 2007-12-11, Official Statement 2007-12-12 |
| Oct 31, 2007 | 4.50% | 5.00% | 9–1 | Hoenig Thomas M. Hoenig Thomas Michael Hoenig took office October 1, 1991, as the eighth chief executive of the Tenth District Federal Reserve Bank, in Kansas City, United States. He is serving a full term that began March 1, 2001... dissented, preferring no change. Official Statement |
| Sep 18, 2007 | 4.75% | 5.25% | 10–0 | Official Statement |
| Aug 17, 2007 | 5.25% | 5.75% | 10–0 | The subprime mortgage crisis Subprime mortgage crisis The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages.... roiled the markets shortly after the Fed's August 7 meeting, causing them to release a statement on the 10th saying that they were prepared to act in response to the downturn and had increased liquidity. The Fed then "temporarily" reduced the spread between the primary credit rate and the federal funds rate to 50 basis points from the 100 point spread established in January 2002 in an unscheduled meeting on the 17th. Official Statement, 2007-08-10, Official Statement, 2007-08-10, Official Statement, 2007-08-17. |
| Aug 7, 2007 | 5.25% | 6.25% | 10–0 | Official Statement |
| Jun 28, 2007 | 5.25% | 6.25% | 10–0 | Official Statement |
| May 9, 2007 | 5.25% | 6.25% | 10–0 | Official Statement |
| Mar 21, 2007 | 5.25% | 6.25% | 10–0 | Bies Susan Bies Susan Schmidt Bies was a member of the Board of Governors of the Federal Reserve System.-Education and family:Bies was born in Buffalo, New York, and received a B.S. in education from the Buffalo State College in 1967 and an M.A. and a Ph.D. , both in economics, from Northwestern University... recused herself. Official Statement |
| Jan 31, 2007 | 5.25% | 6.25% | 11–0 | Official Statement |
| Dec 12, 2006 | 5.25% | 6.25% | 10–1 | Lacker Jeffrey M. Lacker Jeffrey M. Lacker is an American economist and president of the Federal Reserve Bank of Richmond. He is also a voting member of the Federal Open Market Committee for the year of 2009. Formerly, he was senior vice president and the director of research at the Federal Reserve Bank of... dissented, preferring a 25 basis point increase. Official Statement |
| Oct 25, 2006 | 5.25% | 6.25% | 10–1 | Lacker Jeffrey M. Lacker Jeffrey M. Lacker is an American economist and president of the Federal Reserve Bank of Richmond. He is also a voting member of the Federal Open Market Committee for the year of 2009. Formerly, he was senior vice president and the director of research at the Federal Reserve Bank of... dissented, preferring a 25 basis point increase. Official Statement |
| Sep 20, 2006 | 5.25% | 6.25% | 10–1 | Lacker Jeffrey M. Lacker Jeffrey M. Lacker is an American economist and president of the Federal Reserve Bank of Richmond. He is also a voting member of the Federal Open Market Committee for the year of 2009. Formerly, he was senior vice president and the director of research at the Federal Reserve Bank of... dissented, preferring a 25 basis point increase. Official Statement |
| Aug 8, 2006 | 5.25% | 6.25% | 9–1 | The Fed kept rates stable this meeting; they had raised the rates by 25 basis points for seventeen consecutive meetings prior. Lacker Jeffrey M. Lacker Jeffrey M. Lacker is an American economist and president of the Federal Reserve Bank of Richmond. He is also a voting member of the Federal Open Market Committee for the year of 2009. Formerly, he was senior vice president and the director of research at the Federal Reserve Bank of... dissented, preferring a 25 basis point increase. Official Statement |
| Jun 29, 2006 | 5.25% | 6.25% | 10–0 | Official Statement |
| May 10, 2006 | 5.00% | 6.00% | 10–0 | Official Statement |
| Mar 28, 2006 | 4.75% | 5.75% | 11–0 | This was Ben Bernanke Ben Bernanke Ben Shalom Bernanke is an American economist, and the current Chairman of the Federal Reserve, the central bank of the United States. During his tenure as Chairman, Bernanke has overseen the response of the Federal Reserve to late-2000s financial crisis.... 's first meeting as new Chairman, replacing Alan Greenspan Alan Greenspan Alan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC... . He continued Greenspan's policy of gradual tightening and pledged increased transparency for the Federal Reserve. Official Statement |
| Jan 31, 2006 | 4.50% | 5.50% | 10–0 | Official Statement |
| Dec 13, 2005 | 4.25% | 5.25% | 10–0 | Official Statement |
| Nov 1, 2005 | 4.00% | 5.00% | 10–0 | Official Statement |
| Sep 20, 2005 | 3.75% | 4.75% | 9–1 | Olson dissented, preferring no change. Official Statement |
| Aug 9, 2005 | 3.50% | 4.50% | 9–1 | Official Statement |
| Jun 30, 2005 | 3.25% | 4.25% | 11–0 | Official Statement |
| May 3, 2005 | 3.00% | 4.00% | 10–0 | Official Statement |
| Mar 22, 2005 | 2.75% | 3.75% | 11–0 | Official Statement |
| Feb 2, 2005 | 2.50% | 3.50% | 12–0 | Official Statement |
| Dec 14, 2004 | 2.25% | 3.25% | 12–0 | The FOMC changed their previous policy on the release of the minutes from each meeting. Previously, the minutes were released only after the next meeting had already finished, rendering them only of historical interest; this was changed to be released three weeks after the date of a policy decision. The minutes thus became available for predicting the FOMC's action in the next meeting. Official Statement |
| Nov 10, 2004 | 2.00% | 3.00% | 12–0 | Official Statement |
| Sep 21, 2004 | 1.75% | 2.75% | 12–0 | Official Statement |
| Aug 10, 2004 | 1.50% | 2.50% | 12–0 | Official Statement |
| Jun 30, 2004 | 1.25% | 2.25% | 12–0 | Official Statement |
| May 4, 2004 | 1.00% | 2.00% | 12–0 | Official Statement |
| Mar 16, 2004 | 1.00% | 2.00% | 12–0 | Official Statement |
| Jan 28, 2004 | 1.00% | 2.00% | 12–0 | Official Statement |
| Dec 9, 2003 | 1.00% | 2.00% | 12–0 | Official Statement |
| Oct 28, 2003 | 1.00% | 2.00% | 12–0 | Official Statement |
| Sep 16, 2003 | 1.00% | 2.00% | 12–0 | Official Statement |
| Aug 12, 2003 | 1.00% | 2.00% | 12–0 | Official Statement |
| Jun 25, 2003 | 1.00% | 2.00% | 11–1 | Parry dissented, preferring a 50 basis point cut. Official Statement |
| May 6, 2003 | 1.25% | 2.25% | 12–0 | Official Statement |
| Mar 18, 2003 | 1.25% | 2.25% | 12–0 | Official Statement |
| Jan 29, 2003 | 1.25% | 2.25% | 12–0 | Official Statement |
| Jan 9, 2003 | 1.25% | 2.25% | No meeting, but new discount window Discount window The discount window is an instrument of monetary policy that allows eligible institutions to borrow money from the central bank, usually on a short-term basis, to meet temporary shortages of liquidity caused by internal or external disruptions... rules introduced in October were implemented. These mandated a discount rate 100 basis points higher than the federal funds rate, effectively hiking it by 150 basis points. Official Statement |
|
| Dec 10, 2002 | 1.25% | 0.75% | 12–0 | Official Statement |