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Meeting of the Federal Open Market Committee
June 26-27, 2001
A meeting of the Federal Open Market Committee was held in the offices of the Board of Governors of the Federal Reserve System in Washington, D.C., beginning on Tuesday, June 26,2001, at 2:00 p.m. and continuing on Wednesday, June 27, 2001, at 9:00 a.m.Present:Mr. Greenspan, Chairman
Mr. McDonough, Vice Chairman
Mr. Ferguson
 
 
 
 
 
Mr. GramlichMr. HoenigMr. KelleyMr. MeyerMs. MinehanMr. MoskowMr. PooleMessrs. Jordan, McTeer, Santomero, and Stern, Alternate Members of theFederal Open Market CommitteeMessrs. Broaddus, Guynn, and Parry, Presidents of the Federal ReserveBanks of Richmond, Atlanta, and San Francisco respectivelyMr. Kohn, Secretary and EconomistMr. Bernard, Deputy SecretaryMs. Fox, Assistant SecretaryMr. Gillum, Assistant SecretaryMr. Mattingly, General CounselMr. Baxter, Deputy General CounselMs. Johnson, EconomistMr. Stockton, EconomistMessrs. Fuhrer, Hakkio, Howard, Hunter, Lindsey, Rasche, Reinhart,Slifman, and Wilcox, Associate EconomistsMr. Kos, Manager, System Open Market AccountMs. Smith and Mr. Winn, Assistants to the Board, Office of BoardMembers, Board of GovernorsMr. Ettin, Deputy Director, Division of Research and Statistics, Board of Governors
 
______________________2Mr. Simpson, Senior Adviser, Division of Research and Statistics, Board of GovernorsMr. Madigan, Associate Director, Division of Monetary Affairs, Board of GovernorsMessrs. Oliner and Struckmeyer, Associate Directors, Division of Researchand Statistics, Board of GovernorsMessrs. Freeman
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and Whitesell, Assistant Directors, Divisions of International Finance and Monetary Affairs respectively, Board of GovernorsMs. Kusko
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and Mr. Sichel
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, Senior Economists, Division of Research andStatistics, Board of GovernorsMr. Nelson, Senior Economist
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, and Ms. Garrett, Economist, DivisionMonetary Affairs, Board of GovernorsMr. Fleischman
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, Economist, Division of Research and Statistics, Board of GovernorsMs. Low, Open Market Secretariat Assistant, Division of Monetary Affairs,Board of GovernorsMs. Pianalto, First Vice President, Federal Reserve Bank of ClevelandMessrs. Beebe, Eisenbeis, and Goodfriend, Mses. Krieger and Mester,Messrs. Rolnick, Rosenblum, and Steindel, Senior VicePresidents, Federal Reserve Banks of San Francisco, Atlanta,Richmond, New York, Philadelphia, Minneapolis, Dallas, andNew York respectivelyMr. Altig, Vice President, Federal Reserve Bank of ClevelandMr. Fernald
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, Economist, Federal Reserve Bank of Chicago1/  /  / Attended portion of meeting relating to staff presentations.2Attended portion of meeting relating to productivity developments.3Attended Tuesday's session only.
 
Transcript of Federal Open Market Committee Meeting of June 26-27, 2001June 26--Afternoon SessionCHAIRMAN GREENSPAN. Mr. Kos.MR. KOS. I’ll be referring to the package of colored charts that wasdistributed this afternoon.
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U.S. short-term interest rates have continued to decline during theintermeeting period, reflecting weaker-than-expected economic data andweak corporate earnings reports. Three-month cash rates fell 33 basispoints since the last meeting and 3-month forward rates declined 31 basispoints. The 3-month deposit rate nine months forward, the yellow line, hasalso fallen by a similar amount, but it continues to imply higher interestrates for the first half of 2002, although I should add that anecdotalconversations find few people who go along with that expectation. Theexception is the minority of market participants who believe that a sharprecovery will manifest itself in the second half.In the middle panel, the euro-area cash rates have been stable since theCommittee’s last meeting. But the 3-month and 9-month forward rateshave been pulled down, as data have come in weaker for the euro area as awhole and for Germany in particular.In the bottom panel are three snapshots of the Japanese governmentyield curve from three months out to ten years. The three snapshot dateswere March 1
st
, a few weeks before the change in the Bank of Japan’soperational target, May 15
th
, and June 25
th
. At first, the bill sector wasbumping up against the zero axis, but now the short end of the couponcurve is also being dragged down. And as we speak, all Japanesegovernment bond maturities out to three years yield 14 basis points or less.On the next page is an update of a chart that you last saw at the Marchmeeting. The chart depicts the shape of the yield curve at the short end inthe major economies. The top panel shows the 2-year yield less the centralbank’s short-term policy rate. The bottom panel shows the 2-year swap rateless the same policy rate. I should note that the policy rates used involveslightly different maturities; some central banks have an overnight rate,some a rate with a maturity of as long as two weeks. And the top paneluses the German 2-year note versus the ECB’s refinancing rate. Thebottom panel uses the euro 2-year swap rate. Whether measured against the2-year note or the swap rate, we observe fairly sharp inversions by year-end2000. Since the easings of the past few months by the central banks of the
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Copies of the charts are appended to this transcript. (Appendix 1)
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