The Committee expected inflation to moderate later this year and next year, but the inflation outlook remained highly uncertain. The downside risks to growth and the upside risks to inflation were both of significant concern to the Committee. The Committee indicated that it would continue to monitor economic and financial developments carefully and would act as needed to promote sustainable economic growth and price stability.
The Committee's decision to reduce the target federal funds rate 50 basis points as part of a coordinated action with other central banks on October 8
the staff lowered its projection for economic activity in the second half of 2008 as well as in 2009 and 2010.
Meeting participants noted that real consumer spending had been weakening through the summer, responding to lower employment and tighter credit. Moreover, households, like businesses, were reportedly reacting to the shifting economic circumstances in recent weeks by cutting expenditures further
Participants agreed that inflation was likely to diminish materially in coming quarters.
The recent substantial tightening in financial conditions, the sharp downshift in spending here and abroad, and the rapid abatement of upside inflation risks all suggested that a forceful policy response would be appropriate.