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Meeting of the Federal Open Market Committee
August 21, 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., on Tuesday, August 21, 2001,at 9:00 a.m.Present:Mr. Greenspan, ChairmanMr. McDonough, Vice ChairmanMr. FergusonMr. GramlichMr. HoenigMr. KelleyMr. MeyerMs. MinehanMr. MoskowMr. PooleMessrs. Jordan, McTeer, Santomero, and Stern, Alternate Members of the Federal 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 SecretaryMr. Gillum, Assistant SecretaryMr. Mattingly, General CounselMr. Baxter, Deputy General CounselMs. Johnson, EconomistMr. Reinhart, EconomistMr. Stockton, EconomistMs. Cumming, Messrs. Hakkio, Howard, Hunter, Lindsey, Rasche,Slifman, and Wilcox, Associate EconomistsMr. Kos, Manager, System Open Market AccountMs. Smith, Assistant to the Board, Office of Board Members, Board of GovernorsMr. Ettin, Deputy Director, Division of Research and Statistics, Board of Governors
 
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Mr. Madigan, Deputy Director, Division of Monetary Affairs, Board of GovernorsMr. Simpson, Senior Adviser, Division of Research and Statistics, Boardof GovernorsMessrs. Oliner and Struckmeyer, Associate Directors, Division of Research and Statistics, Board of GovernorsMr. Helkie, Assistant Director, Division of International Finance, Boardof GovernorsMr. Whitesell, Assistant Director, Division of Monetary Affairs, Boardof GovernorsMr. Skidmore, Special Assistant to the Board, Office of Board Members,Board of GovernorsMr. Kumasaka, Assistant Economist, Division of Monetary Affairs,Board of GovernorsMs. Low, Open Market Secretariat Assistant, Office of Board Members,Board of GovernorsMs. Browne, Executive Vice President, Federal Reserve Bank of BostonMessrs. Eisenbeis and Lacker, Ms. Mester, Messrs. Rosenblum andSniderman, Senior Vice Presidents, Federal Reserve Banks of Atlanta, Richmond, Philadelphia, Dallas, and ClevelandrespectivelyMs. Hargraves and Mr. Judd, Vice Presidents, Federal Reserve Banks of New York and San Francisco respectivelyMr. Weber, Senior Research Officer, Federal Reserve Bank of Minneapolis
 
Transcript of Federal Open Market Committee Meeting of 
August 21, 2001
CHAIRMAN GREENSPAN. Who would like to move approval of the minutes of theJune 26-27, 2001 meeting?VICE CHAIRMAN MCDONOUGH. Move approval.MS. MINEHAN. Second.CHAIRMAN GREENSPAN. Without objection, they are approved. Dino Kos.MR. KOS. Thank you, Mr. Chairman. I will be referring to thecharts that were distributed at your places earlier this morning.
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The first chart depicts the standard 3-month cash and forwarddeposit rates from early April through last Friday. As you can see, U.S.short-term rates continued to decline over the recent intermeetinginterval. Weak corporate earnings, layoff announcements, and a BeigeBook that was perceived as downbeat were among many other factorsthat affected sentiment during the period. Three-month cash andforward rates declined by about 20 basis points over the period. Nine-month forward rates rose immediately after the June FOMC meetingbut then declined quickly and on balance fell about 35 basis points forthe period as a whole. While the 9-month forward rate may suggestthat the market is building toward a tightening later in 2002, as perhapsdoes the Eurodollar future strip, other indicators such as the 2-yearnote are more ambiguous--a subject I’ll talk about later.In the euro area, cash rates have been stable since the last meeting,but 3-month and 9-month forward rates have continued to be pulledlower, by 16 and 21 basis points respectively. Forecasts for the euro-area economy have been trimmed and the market is cautiously buildingin some additional easing, with many market participants expecting 25basis points of ease at the end of this month. The largest changes inrates occurred on August 8
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and 9
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after the Beige Book was releasedhere and the ECB’s monthly report, which was viewed as paving theway for an ease in policy, was released in Europe.The bottom panel shows the Japanese government yield curve from3 months out to 10 years. I’ve highlighted three snapshots coincidingwith the last two FOMC meeting dates and this past Friday, ahead of the current meeting. The short end of the curve is below 20 basis points
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The charts used by Mr. Kos are appended to this transcript.
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