What the Fed said: A translationBy Holden Lewis • Bankrate.com...

What the Fed said: A translation
By Holden Lewis • Bankrate.com
Your teachers told you to write clearly. Meanwhile, a select group of smarter kids was secretly indoctrinated in the skillful use of passive voice. Their English teachers -- no, not from England, silly (well, except for that one who really did hail from London), but instructors in the effective use of the language -- taught them the joys (and the career benefits to be gained thereby) of creating long, meandering sentences with lots of commas, dashes and parentheses, and of the profit in using words such as "accommodative," "sustainable" and "upside" when attempting to impress those of us who might be just as smart, but not (it must be said, regrettably) as verbose.

At Bankrate, we're bilingual. We translate Fedspeak into regular English. Our teachers would feel proud.


What the Fed said:
The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 3-3/4 percent.

Translation:
The Federal Reserve's rate-setting Open Market Committee raised its target for the federal funds rate by a quarter of a percentage point to 3.75 percent.

What the Fed said:
Output appeared poised to continue growing at a good pace before the tragic toll of Hurricane Katrina. The widespread devastation in the Gulf region, the associated dislocation of economic activity and the boost to energy prices imply that spending, production and employment will be set back in the near term. In addition to elevating premiums for some energy products, the disruption to the production and refining infrastructure may add to energy price volatility.

Translation:
The economy was growing at a good pace until Hurricane Katrina hit the Gulf Coast and damaged so many homes and businesses. The damage put people out of work and harmed oil production and refining, at least temporarily. Fuel prices rose and might continue to rise and fall abruptly.

What the Fed said:
While these unfortunate developments have increased uncertainty about near-term economic performance, it is the Committee's view that they do not pose a more-persistent threat. Rather, monetary policy accommodation, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Higher energy and other costs have the potential to add to inflation pressures. However, core inflation has been relatively low in recent months, and longer-term inflation expectations remain contained.

Translation:
We don't know how much the disruption will mess up the economy over the next few weeks and months, but things will get back to normal. Relatively low interest rates, along with American workers' increasing productivity, are helping to make the economy grow. Higher fuel costs might lead to an increase in overall prices, but inflation has been relatively low in recent months, and it's expected to stay that way. We're a bit more worried about inflation now than we were in early August.

What the Fed said:
The Committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal. With underlying inflation expected to be contained, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.

Translation:
We do what we can to minimize the risk of inflation suddenly popping out of control or of the economy plunging into recession. Right now we're more worried about the damage that could be caused by inflation, even though it appears under control. To keep prices in check, we will continue to raise interest rates gradually and steadily.

What the Fed said:
Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Roger W. Ferguson Jr.; Richard W. Fisher; Donald L. Kohn; Michael H. Moskow; Anthony M. Santomero; and Gary H. Stern. Voting against was Mark W. Olson, who preferred no change in the federal funds rate target at this meeting.

Translation:
Instead of the usual unanimous decision, Mark W. Olson, a member of the Fed's Board of Governors, voted to keep the federal funds rate unchanged at 3.5 percent. The rest voted for the increase.

What the Fed said:
In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 4-3/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Richmond, Chicago, Minneapolis and Kansas City.

Translation:
Seven of the Fed's 12 districts asked for a corresponding increase in the discount rate, which is what the Fed charges when it lends directly to banks.


-- Posted: Sept. 20, 2005