June 26–27 · Published August 23, 2001
Statement·Presser·Minutes·Policy
AGAlan GreenspanJune 26–27, 2001 FOMC Minutes
Our reading
The minutes are consistent with the statement because they detail the FOMC's decision to lower the federal funds rate by 25 basis points to 3-3/4 percent, as stated, and they reflect the same rationale—concerns about economic weakness, contained inflation, and a risk assessment weighted toward potential economic softness—while also noting the dissenting view of Mr. Poole, who opposed the easing and the risk statement, which aligns with the statement's mention of the decision but not the dissent.
Our reading compares the minutes of the June 26–27 FOMC meeting with the FOMC statement issued at the end of that meeting, three weeks before the minutes were published.
Vote
- Roger W. Ferguson, Jr.
- Edward M. Gramlich
- Alan Greenspan
- Thomas M. Hoenig
- Edward W. Kelley, Jr.
- William J. McDonough
- Laurence H. Meyer
- Cathy E. Minehan
- Michael H. Moskow
- William Poole ↑ dissented
- Mr. Poole dissented because he believed that FOMC actions this year had already established a highly stimulative monetary policy stance. The M2 and MZM measures of money had risen at annual rates in excess of 10 percent and 20 percent respectively over the past six months, and the real federal funds rate was very likely below its equilibrium level. Other more qualitative information on financial conditions pointed in the same direction. Economic forecasts were that the economy's growth would resume later this year and the fact that long-term interest rates had not declined since December also indicated that the market anticipated a revival of faster economic growth before long. Given the lags in monetary processes, he believed that adding further monetary policy stimulus raised an undue risk of fostering higher inflation in the future. Moreover, against this background, he was especially concerned that a statement that the Committee continued to view the balance of risks as weighted toward weakness would be read in the market as a sign that the Committee was likely to ease further in the near term. He thought future developments were equally likely to warrant an action in either direction, and he did not think the Committee should take a step that probably would cause expectations of further easing to become embedded in market interest rates.
From the minutes
FOMC minutes
Footnotes
1. Attended portion of meeting relating to staff presentations. Return to text
2. Attended portion of meeting relating to productivity developments. Return to text
3. Attended Tuesday's session only. Return to text
What changed from the previous meeting’s minutes
- The federal funds rate target was reduced by 25 basis points to 3.75 percent, down from a 50 basis point cut to 4 percent.
- The vote was 10-1, with Mr. Poole dissenting, whereas previously Mr. Hoenig dissented.
- The FOMC projected 2001 GDP growth of 1.25 to 2 percent, a new forecast not in the prior minutes.
- The FOMC projected 2002 unemployment of 4.75 to 5.25 percent, a new forecast not in the prior minutes.
- The FOMC noted energy prices had declined appreciably, a change from the prior concern about high energy costs.
- The FOMC stated policy had become stimulative, a shift from the prior view that it was only marginally accommodative.
Summary generated automatically from the two documents.