Monetary policy report to the Congress, February 17, 2000 (semi-annual Humphrey-Hawkins report)

The U.S. economy posted another exceptional performance in 1999. The ongoing expansion appears to have maintained strength into early 2000 as it set a record for longevity, and-aside from the direct effects of higher crude oil prices-inflation has remained subdued, in marked contrast to the typical experience during previous expansions. The past year brought additional evidence that productivity growth has improved substantially since the mid-1990s, boosting living standards while helping to hold down increases in costs and prices despite very tight labor markets. To maintain the low inflation environment that has been so important to the sustained health of the current expansion, the Federal Open Market Committee has implemented four quarter-point increases in the intended federal funds rate since mid-1999; the most recent of these came at the beginning of February 2000. In total, the federal funds rate has been raised 1 percentage point, although, at 5 _ percent, it stands only ¬ point above its level just before the autumn 1998 financial market turmoil. At its most recent meeting, the FOMC indicated that risks appear to remain on the side of heightened inflation pressures, so it will need to remain especially attentive to developments in this regard.