U.S. Fed's Cuts Discount Rate; Fed Board Statement (Text)

U.S. Fed's Cuts Discount Rate; Fed Board Statement (Text)
2007-08-17 08:15 (New York)


By Alex Tanzi
Aug. 17 (Bloomberg) -- The following is the text from the
Federal Reserve's Open Market Committee and the Federal Reserve
Board.

Federal Reserve's Open Market Committee

Financial market conditions have deteriorated, and tighter credit
conditions and increased uncertainty have the potential to
restrain economic growth going forward. In these circumstances,
although recent data suggest that the economy has continued to
expand at a moderate pace, the Federal Open Market Committee
judges that the downside risks to growth have increased
appreciably. The Committee is monitoring the situation and is
prepared to act as needed to mitigate the adverse effects on the
economy arising from the disruptions in financial markets.
Voting in favor of the policy announcement were: Ben S.
Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Richard W.
Fisher; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner;
Frederic S. Mishkin; Michael H. Moskow; Eric Rosengren; and Kevin
M. Warsh.

Federal Reserve Board

To promote the restoration of orderly conditions in financial
markets, the Federal Reserve Board approved temporary changes to
its primary credit discount window facility. The Board approved
a 50 basis point reduction in the primary credit rate to 5-3/4
percent, to narrow the spread between the primary credit rate and
the Federal Open Market Committee's target federal funds rate to
50 basis points. The Board is also announcing a change to the
Reserve Banks' usual practices to allow the provision of term
financing for as long as 30 days, renewable by the borrower.
These changes will remain in place until the Federal Reserve
determines that market liquidity has improved materially. These
changes are designed to provide depositories with greater
assurance about the cost and availability of funding. The
Federal Reserve will continue to accept a broad range of
collateral for discount window loans, including home mortgages
and related assets. Existing collateral margins will be
maintained. In taking this action, the Board approved the
requests submitted by the Boards of Directors of the Federal
Reserve Banks of New York and San Francisco.

--Editors: Barrett