The Fed Translated….

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2%.

Economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports. Partly reflecting the stimulus checks that we all received during the second quarter.   Did you spend, save, or pay off debts with yours? However, labor markets have softened further When the markets expected 70,000 jobs lost and we got some “good news” of only 51,000 jobs lost for July, you know the job market is softening. and financial markets remain under considerable stress Yep.  Enough said. Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters The next few quarters – so we are going to be in this for a while. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth. Eventually we’ll work our way out of this.

Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities, and some indicators of inflation expectations have been elevated. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain. Inflation has calmed down, especially with the recent drop in oil and other commodities.   However, we don’t know what it’s going to look like going forward.

Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the Committee. It’s a toss up.   There are risks on both sides and we’re not really sure what is going to happen. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability. We haven’t fallen asleep, we are aware of what we see going on and we’re going to do what we can to help.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting