**MNI POLICY: FOMC Cuts by 25 bps; Lowers IOER, ONRRP By 30 bps>

--7 Officials See 1 More Rate Cut This Year

--Bullard Dissents In Favor of 50 bps Cut

--Rosengren, George Dissents; Want Rates Above 2%

By Jean Yung

     WASHINGTON (MNI) - The Federal Reserve on Wednesday lowered the 

target range for its fed funds rate by a quarter-point, as expected, but 

cut its administered rates, both IOER and ON RRP Rate, by 30 bps in 

response to a massive funding squeeze in money markets this week. 

     --Seven officials see one more rate cut this year, which would put 

the target range at 1.5% to 1.75%. Five project rates to hold steady for 

the rest of the year, while another five indicated they would prefer 

to see rates in a 2% to 2.25% range by December. 

     --St. Louis Fed President Jim Bullard dissented in favor of a 50 

bps cut, while Esther George of Kansas City and Eric Rosengren of Boston 

dissented in favor of raising rates back to a 2% to 2.25% range. 

     --The policy statement and economic projections were very little 

changed, except to note that household spending has been rising at a 

"strong pace," and that business fixed investment and exports have 

"weakened." Inflation continues to run "below 2%" with core PCE 

inflation expected to end the year at 1.8%, unchanged from expectations 

in June. GDP growth was marked up by a tenth this year to 2.2%, and the 

unemployment rate was seen ending the year at 3.7%, a tenth higher than 

projected in June. 

     --The median longer run fed funds rate remained unchanged at 2.5% 

though the range of projections for the neutral rate moved down to as 

low as 2.0%. 

     --No mention of a standing repo facility or the start of balance 

sheet expansion. 

--MNI Washington Bureau, Tel: +1 202-371-2121; email: dcoffice@marketnews.com

     ** MNI Washington Bureau: 202-371-2121 ** 

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