March 22
Statement·Presser·Minutes
AGAlan GreenspanMarch 22, 1994 FOMC Minutes
Our reading
The minutes are consistent with the statement because they describe the FOMC's decision to implement a "slight increase" in reserve pressure, which aligns with the statement's announcement of a small tightening action, despite some members preferring a larger move.
Our reading compares the minutes of the March 22 FOMC meeting with the FOMC statement issued at the end of that meeting, three weeks before the minutes were published.
Vote
- J. Alfred Broaddus, Jr. ↑ dissented
- Because they preferred a stronger move toward a more neutral policy stance. In their view, the recent sharp increases in longer-term interest rates indicated clearly that inflationary expectations were rising and that the principal policy risk had become one of remaining accommodative for too long a period. In this environment, they believed that a more aggressive move would underscore the Committee's commitment to fostering sustainable longer-term growth and reduce the risk that a highly restrictive policy might be required at a later date to contain inflation.
- Robert P. Forrestal
- Alan Greenspan
- Jerry L. Jordan ↑ dissented
- Because they preferred a stronger move toward a more neutral policy stance. In their view, the recent sharp increases in longer-term interest rates indicated clearly that inflationary expectations were rising and that the principal policy risk had become one of remaining accommodative for too long a period. In this environment, they believed that a more aggressive move would underscore the Committee's commitment to fostering sustainable longer-term growth and reduce the risk that a highly restrictive policy might be required at a later date to contain inflation.
- Edward W. Kelley, Jr.
- John P. LaWare
- Lawrence B. Lindsey
- William J. McDonough
- Robert T. Parry
- Susan M. Phillips
From the minutes
FOMC minutes
The components of the trilateral facility include (1) swap agreements between the United States and Mexico for up to $6.0 billion, with the Treasury and the Federal Reserve each participating up to $3.0 billion; (2) an expansion of the swap agreement between the Bank of Canada and the Bank of Mexico to CAN$1.0 billion; and (3) a reaffirmation of the existing swap agreement between the Bank of Canada and the Federal Reserve in the amount of $2.0 billion, with the above-noted maturity extension.
Mr. Broaddus dissented because he was concerned about the appropriateness of the System's involvement in this type of foreign currency operation. In his view, the System's swap network raised a number of broad issues that he felt the Committee needed to review at some point. Accordingly, he would not favor increasing any existing swap arrangement until such a review had taken place.
At a telephone conference on April 18, Committee members reviewed economic and financial developments since the March meeting and discussed the desirability of taking further action to move policy away from its still accommodative stance. Broad indicators of economic activity, supported by widespread anecdotal evidence, pointed to considerable momentum in economic activity and further reductions in already limited margins of unutilized labor and other production resources. In financial markets, sharp declines in bond and stock prices suggested that speculative excesses had been reduced, and ongoing portfolio realignments probably were shifting long-term financial assets to firmer hands. As a result, financial markets now appeared to be less likely to overreact to adverse developments or to policy actions. In the circumstances, the members supported the Chairman's decision to reduce the degree of accommodation in reserve markets slightly further at this time rather than to await the next regularly scheduled meeting in mid-May. Some members expressed the view that an increase in the discount rate would provide a desirable supplement to this policy action.
Secretary
What changed from the previous meeting’s minutes
- The March 22 meeting saw two dissenting votes (Broaddus and Jordan) against the policy action, whereas the February 4 meeting had none.
- The March directive retained the February-established M2 and M3 ranges of 1 to 5 percent and 0 to 4 percent, with no new ranges set.
- The March minutes noted M2 declined and M3 fell sharply in February, while February minutes reported relatively slow growth in both aggregates.
- The March meeting authorized a temporary increase in the swap arrangement with the Bank of Mexico from $700 million to $3.0 billion, a new action not in February.
- The March minutes reported a depreciation of the dollar over the intermeeting period, whereas February minutes said the dollar was about unchanged.
- The March meeting authorized the Chairman to release a press statement on the policy decision, following a similar announcement in February, but with some members expressing reservations.
Summary generated automatically from the two documents.