Circular
Target for Federal Funds Rate Lowered by 50 Basis Points
March 20, 2002
Circular No. 11329

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."