Circular
Target for Fed Funds Rate Lowered by 25 Basis Points
Discount Rate Reduced by 25 Basis Points
November 17, 1998
Circular No. 11112

To All Depository Institutions and Others Concerned in the Second Federal Reserve District:

Following is a statement issued today by the Board of Governors of the Federal Reserve System:

The Federal Reserve today announced the following set of policy actions:

The Board of Governors approved a reduction in the discount rate by 25 basis points, from 4-3/4 percent to 4-1/2 percent.

The federal funds rate is expected to fall 25 basis points, from around 5 percent to around 4-3/4 percent.

Although conditions in financial markets have settled down materially since mid-October, unusual strains remain. With the 75 basis point decline in the federal funds rate since September, financial conditions can reasonably be expected to be consistent with fostering sustained economic expansion while keeping inflationary pressures subdued.

In taking the discount rate action, the Board approved requests submitted by the boards of directors of the Federal Reserve Banks of New York, Philadelphia, and Dallas. The discount rate is the interest rate that is charged depository institutions when they borrow from their district Federal Reserve Banks.