Transcript of Federal Open Market Committee Meeting of
December 11, 2001
CHAIRMAN GREENSPAN. I would first like to welcome our new members—Susan Biesand Mark Olson.MS. BIES. Thank you.MR. OLSON. Thank you.CHAIRMAN GREENSPAN. Would somebody like to move approval of the minutes of our November 6
th
meeting?VICE CHAIRMAN MCDONOUGH. So move.CHAIRMAN GREENSPAN. Is there a second?MS. MINEHAN. Second.CHAIRMAN GREENSPAN. Without objection, they are approved. Mr. Kos.MR. KOS. Thank you, Mr. Chairman. I’ll be referring to the charts that
were distributed to you this morning.
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The top panel on the first page shows U.S. and euro-area cash and forward
rates. The 3-month U.S. dollar deposit rate, the solid red line, is little changed
since your last meeting and as you can see the 3-month forward rate largely
tracked the cash rate. But the 3-month deposit rate 9 months forward, the red
line with narrow dashes, reflects the volatility of expectations in the past month.
First, the 9-month forward rate moved upward after release of the stronger than
expected retail sales report on November 14
th
. Then it declined about 1/2
percentage point after the November 27
th
Michigan Confidence report was
weaker than expected and comments by Governor Meyer were perceived as
keeping the door open for a further easing of policy. Subsequently, on
December 5
th
, that rate rose again after the nonmanufacturing NAPM index--an
indicator that generally receives little notice--rose sharply and heightened
expectations for a near-term recovery. Friday’s weak employment report did
not alter the optimism that is built into forward rates. That leaves the market in
a somewhat unusual position of having priced in a bit more ease in the near
term--indeed 22 out of 24 primary dealers expect an easing at this meeting--but
then an aggressive tightening beginning sometime in the second half of 2002.
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The charts used by Mr. Kos are appended to this transcript.
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