PREFATORY NOTE

These transcripts have been produced from the original raw
transcripts in the FOMC Secretariat's files. The Secretariat has
lightly edited the originals to facilitate the reader's understanding.
Where one or more words were missed or garbled in the transcription,
the notation "unintelligible" has been inserted. In some instances,
words have been added in brackets to complete a speaker's thought or
to correct an obvious transcription error or misstatement.
Errors undoubtedly remain. The raw transcripts were not
fully edited for accuracy at the time they were produced because they
were intended only as an aid to the Secretariat in preparing the
records of the Committee's policy actions. The edited transcripts
have not been reviewed by present or past members of the Committee.
Aside from the editing to facilitate the reader's
understanding, the only deletions involve a very small amount of
confidential information regarding foreign central banks, businesses.
and persons that are identified or identifiable. Deleted passages are
indicated by gaps in the text. All information deleted in this manner
is exempt from disclosure under applicable provisions of the Freedom
of Information Act.

F e d e r a l Open Market Committee Conference C a l l February 1 , 1991

PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Ms.

G r e e n s p a n , Chairman C o r r i g a n . Vice Chairman Black Forrestal Keehn Kelley LaWare Mullins Parry Seger

M e s s r s . G u f f e y . H o s k i n s , M e l z e r , and S y r o n , A l t e r n a t e Members of t h e F e d e r a l Open Market Committee M e s s r s . Boehne, McTeer. and S t e r n , P r e s i d e n t s of t h e F e d e r a l R e s e r v e Banks of P h i l a d e l p h i a , D a l l a s , and M i n n e a p o l i s , r e s p e c t i v e l y
Mr. Mr. Mr. Mr.

Kohn, S e c r e t a r y and Economist
Bernard. A s s i s t a n t S e c r e t a r y
G i l l u m , Deputy A s s i s t a n t S e c r e t a r y
P r e l l . Economist

Messrs. L i n d s e y , P r o m i s e l , Siegman. and Simpson, A s s o c i a t e Economists

Mr. S t e r n l i g h t , Manager f o r Domestic O p e r a t i o n s , System Open Market Account M r . C r o s s , Manager f o r F o r e i g n O p e r a t i o n s , System Open Market Account
Messrs. Coyne and Winn, A s s i s t a n t s t o t h e B o a r d , O f f i c e of Board Members, Board of G o v e r n o r s Mr. Wiles. S e c r e t a r y o f t h e B o a r d , O f f i c e o f t h e S e c r e t a r y , Board o f G o v e r n o r s M r . E t t i n , Deputy D i r e c t o r , D i v i s i o n o f R e s e a r c h and S t a t i s t i c s , Board o f Governors Mr. S t o c k t o n . A s s o c i a t e D i r e c t o r , D i v i s i o n of R e s e a r c h and S t a t i s t i c s , Board o f G o v e r n o r s Mr. Moore, S p e c i a l A s s i s t a n t t o t h e Board. O f f i c e of Board Members, Board of Governors M s . Johnson, A s s i s t a n t S e c r e t a r y , Office o f t h e S e c r e t a r y , Board of G o v e r n o r s M S . Low. Open Market S e c r e t a r i a t A s s i s t a n t , D i v i s i o n o f Monetary A f f a i r s , Board o f Governors

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Mr. Oltman, F i r s t Vice P r e s i d e n t . F e d e r a l R e s e r v e Banks of New York
Mr. Rosenblum, S e n i o r Vice P r e s i d e n t , F e d e r a l R e s e r v e Bank of D a l l a s

Transcript of Telephone Conference Call of
February 1. 1991
CHAIRMAN GREENSPAN. [I would like to inform you of an announcement the Board plans to make this morning. The press release] draft in tentative form would read "The Federal Reserve Board today announced a reduction in the discount rate from 6-112 to 6 percent effective on Monday. February 4th. This action was taken in light o f further declines in economic activity, continued sluggish growth trends in money and credit, and evidence of abating inflationary pressures, including weakness in commodity prices. In taking the action the Board voted on requests submitted by boards of directors of the Federal Reserve Banks of . . . " And there are now seven banks who have made that request. The data [released] this morning, as you all know, are quite weak. And the Purchasing Managers' report. which is not yet released but will be out later today. is exceptionally weak for the month of January. We basically decided that the numbers are really unequivocal and, even though we are as close a s we are to an FOMC meeting, with five votes here--and Governor Angel1 would have voted for this were he here. but he is in Davos at the moment--itwas thought that it would be better to get this behind us and out of the way and to discuss [at the FOMC meeting] on Tuesday more general issues and what future policy should be. I have no further statement. Does anyone here at the Board wish to make any statement? We are planning to give instructions to the Desk to allow the basis point [reduction] to pass through to the funds rate. Are there any questions or comments either to me, my colleagues, or to the staff, who are sitting here with lots of data?
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MS. SEGER. I have a question on the revision of key December
employment numbers. Do you know where exactly they lost those
additional bodies?
MR. PRELL. I have been sitting here trying to sift through
some of these [numbers].
MS. SEGER. Oh, I'm sorry.
moment] . MR. PRELL. I can try to give you that answer in just [ a

CHAIRMAN GREENSPAN. There was a doubling of the employment
decline for the month of December and part of it is in manufacturing.
MR. PRELL. Yes, but I think that was only about 10,000. Let
me see whether government was revised. There was a significant
downward revision in government employment. I believe.
VICE CHAIRMAN CORRIGAN. Alan. while Mike Prell is looking
for that: When are you planning to announce this?
CHAIRMAN GREENSPAN. the stock exchange.
At 9:15 a.m., prior to the opening of

VICE CHAIRMAN CORRIGAN. Okay, good.

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CHAIRMAN GREENSPAN.

Any f u r t h e r q u e s t i o n s ?

VICE CHAIRMAN CORRIGAN. T h i s i s h i g h l y t e c h n i c a l and I d o n ’ t mean i t t o sound t h a t way. b u t i f y o u ’ r e g o i n g t o announce i t a t 9 : 1 5 a . m . , why i s n ’ t i t e f f e c t i v e t o d a y a s opposed t o Monday? MR. COYNE. W c a n make it e f f e c t i v e t o d a y i f you want. e

CHAIRMAN GREENSPAN.
MS. SEGER.

J e r r y . it i s now e f f e c t i v e t o d a y

F r i d a y , F e b r u a r y 1. Do I g e t a bonus a s V i c e Chairman?

VICE CHAIRMAN CORRIGAN. [Laughter]

MR. MELZER. A l a n , t h i s i s Tom M e l z e r . I d o n ’ t know w h e t h e r you would c o n s i d e r t h i s a t e c h n i c a l p o i n t o r n o t . b u t on t h e d e c i s i o n t o l e t it p a s s t h r o u g h t o t h e f u n d s r a t e : S h o u l d t h a t be a n a c t i o n t a k e n by t h e FOMC?

CHAIRMAN GREENSPAN. T e c h n i c a l l y . s i n c e o u r d i r e c t i v e [ h a s l a n g u a g e ] w i t h r e s p e c t t o p r e s s u r e s on t h e m a r k e t [ “ t a k i n g a c c o u n t o f a p o s s i b l e change i n 1 t h e d i s c o u n t r a t e , ” a s I u n d e r s t a n d i t , t h i s d o e s n o t r e q u i r e FOMC a c t i o n a t t h i s s t a g e .
MR. SYRON. M r . Chairman, t h i s i s D i c k S y r o n . I ’ m n o t a t a l l u n c o m f o r t a b l e w i t h what you have d o n e : i t ’ s a b s o l u t e l y t h e r i g h t t h i n g . But I would j u s t a s k a q u e s t i o n on p r o c e d u r a l g r o u n d s . I n t e r m s of t h e p e r c e p t i o n o f t h e m a r k e t i n t h e f u t u r e when t h i n g s a r e d i s c l o s e d , I wonder w h e t h e r you m i g h t want t o have t h i s be an o f f i c i a l m e e t i n g o f t h e Committee and have a f o r m a l v o t e o f t h e Committee a s a whole on what some would i n t e r p r e t a s t h e s e c o n d [ i n t e r m e e t i n g ] reduction i n t h e funds r a t e .

CHAIRMAN GREENSPAN. I would much p r e f e r t h a t t h a t p e r h a p s be done a t t h e FOMC m e e t i n g i t s e l f . if we’re g o i n g t o do t h a t . b e c a u s e it muddles t h e a c t i o n s .
MR. SYRON. I ’ m s o r r y : I g u e s s I d i d n ’ t u n d e r s t a n d when t h e 5 0 b a s i s p o i n t s would show t h r o u g h t o t h e f u n d s r a t e . Is it going t o show t h r o u g h t o t h e f u n d s r a t e t o d a y ?

MR. KOHN.

Yes.

CHAIRMAN GREENSPAN. [ Y e s , ] i f one can d e t e r m i n e t h a t , g i v e n t h e v o l a t i l i t y we’ve b e e n s e e i n g . I would s a y t h e o n l y way t h a t c o u l d be i n f e r r e d a t t h i s p o i n t would be f r o m t h e l a n g u a g e i n t h e announcement i t s e l f .
MR. KOHN. D i c k , t h i s i s Don Kohn. M i n t e r p r e t a t i o n , y l o o k i n g b a c k on how w e ’ v e t r e a t e d t h e s e t h i n g s a t l e a s t o v e r t h e l a s t 1 5 y e a r s o r s o . was t h a t t h e d e f a u l t mode. s o t o s p e a k , h a s been t h a t u n l e s s s o m e t h i n g e l s e i s d o n e , t h e d i s c o u n t r a t e s t e n d s t o show t h r o u g h p r e t t y much p o i n t - f o r - p o i n t t o t h e f u n d s r a t e . Now, t h a t was maybe a n e a s i e r argument t o s e e when we were r e a l l y t a r g e t i n g on b o r r o w i n g : b u t e v e n t a r g e t i n g on b o r r o w i n g , i n my v i e w , was a n i n d i r e c t way o f g e t t i n g a t t h e f u n d s r a t e . S o . m a d v i c e t o t h e y Chairman h a s been t h a t a p a s s - t h r o u g h was c o n s i s t e n t w i t h h i s t o r y - - o r

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at least consistent with the way the Committee and the Board have behaved relative to one another over the last 15 years or s o . MR. SYRON. Don’t get me wrong: I don’t have any problem at
all with what is being done. I am thinking [about this] in a
perception sense. And I must say that I’m thinking about the
perception in relation to the stories that were in the press early
last month, which I thought were counterproductive, to the effect that
there was a schism within the Committee and that the presidents at
least were dragging their feet in terms of moving [rates] down. In
the sense of erasing any of that notion. it’s clearly your judgment
and the Chairman’s in terms of how you think the markets will react to
this. But I’m just wondering if erasing that notion by having a vote
might be worth considering.
CHAIRMAN GREENSPAN. I would just as soon not, Dick. We’re
taking a fairly abrupt action at this stage. Anything we do to
heighten it would suggest that we think there’s more there than in
fact we’re doing. If that appears to be desirable. I think we can do
it at the meeting.
MR. SYRON. Okay, thank you.

MR. PRELL. Mr. Chairman. could I just correct an impression
I may have left earlier in answer to Governor Seger’s question? There
were downward revisions in the changes from November to December in
just about every category: it’s very widespread.
CHAIRMAN GREENSPAN. Any further questions or comments? not. we look forward to seeing you at the meeting.
END OF SESSION
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