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FOMC Meeting date: NEXT MEETING: OCTOBER 2ND. 2001

MEETING OUTCOME

• LATEST NEWS: The Federal Reserve FOMC and the Board of Governors on Tuesday October 2nd. cut the Federal Funds Rate, the interest rate banks charge each other for overnight loans, by 50 basis points (0.50%) to 2.50%, and the Federal Discount Rate, the interest rate the Federal Reserve charges banks on loans, was cut by 50 basis points (0.50%) to 2.0% so as to boost a struggling US and world economies. Interest rates are now at their lowest levels in 40 years, and this is the 9th cut this year, and the second 50 basis points cut in less than a month.

• The Federal Reserve FOMC and the Board of Governors on Monday September 17th. cut the Federal Funds Rate, the interest rate banks charge each other for overnight loans, by 50 basis points (0.50%) to 3.00%, and the Federal Discount Rate, the interest rate the Federal Reserve charges banks on loans, was cut by 50 basis points (0.50%) to 2.50% so as to boost confidence in the US economy after Tuesday September 11th. terrorist attacks. Following the lead of the Feds, The Bank of Canada, European Central Bank (ECB), and the Swiss National Bank also cut their interest rates by 50 basis points (0.50%) so as to boost confidence in the world economies.

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MEETING AGENDA:

BOARD MEMBERS' RECENT COMMENTS

Board Members Testimonies and Speeches page

THE GENERAL CONSENSUS ABOUT COMING MEETING:

• The Energy Information Agency (EIA) and the American Petroleum Institute (API) reported that for week ending August 17th, US crude oil inventories declined 4.0 million barrels and 5.39 million barrels respectively. As for distillates, the EIA saw an increase of 100,000 barrels, while the API saw a decrease of 856,000 barrels.

• US New Orders for Semiconductor Manufacturing Equipment rose 5% in July, and the May & June figures were revised upwards. Shipments declined 12%, thus pushing up the Bookings-to-Bill ratio up to 0.67.

• The Mortgage Bankers Association (MBA) reported that, its MBA Mortgage Applications Survey for week ending August 17th. rose 0.3%, while the Purchasing Index declined 2.5%. The Refinancing Index also rose by 3.1%.

• US Jobless Claims rose 8,000 to 393,000 in the week ending August 18th. The 4-week moving average rose 7,000 to 379,000.  

• US New Home Sales rose 4.9% to 950,000 units in July. Fixed Mortgage Rates declined to 7.13%.

• US Durable Goods Orders declined 0.6% in July.

• US Existing Home Sales declined a lower than expected 3.0% in July to 5.17 million units.
• The conference board reported that, US Consumer Confidence declined in August to 114.3. All the indices declined except the Expectations Index, which rose.
• US Second Quarter 2001 Gross Domestic Product (GDP) was revised downward to a modest growth of 0.2% (still better than what economists were expecting). Consumer Spending for the period was revised upward to a growth of 2.5%, while Business Spending was revised further downward to a decline of 14.6%. The Implicit Price Deflator, a measure of inflation growth, declined to 2.2%.

• The Mortgage Bankers Association (MBA) reported that for week ending August 24th, its MBA Mortgage Applications Survey rose 8.3% to 552.2. The Purchasing Index rose 0.6% to 295.0, as the Refinancing Index led the increase with an increase of a whopping 15.7%.

• The Energy Information Agency (EIA) reported that for week ending August 24th, US Crude Oil inventory rose 2.7 million barrels, while the American Petroleum Institute (API) saw an increase of 2 million barrels. For Distillates, the EIA saw a decrease of 200,000 barrels, while the API saw an increase of 1.165 million barrels.

• US Jobless Claims for week ending August 24th. declined 1,000 to 399,000. The 4-week moving average rose 12,000 to 393,000.

• The Conference Board reported that, US Help Wanted Index, a good measure of blue collar employee demand, was unchanged in July at 58. The Mid-Atlantic,  New England, East North Central, and Mountain regions saw an increase, while the Pacific, West South Central, South-Atlantic, and West North Central saw declines.

• US Personal Income rose a strong 0.5% in July, the highest increase this year (Personal disposable income rose a whopping 1.8%). Consumption grew only 0.1%, the lowest growth rate this year. The Savings rate rose 2.5%, the highest monthly increase this year.

• The Commerce Department reported that US Q2 2001 internet sales sales stood at $7.46 billion, 1.8% below Q1 2001 levels, but 24.7% higher than Q2 2000. E-commerce as a percent of total retail sales declined from the first quarter levels to 0.92%, but still higher than the year before. Total Retail Sales for Q2 2001 rose to $807.5 billion, well better than the $728.7 billion seen in Q1 2001

• US New Factory Orders rose 0.15% in July, while the June data was revised downward to a decline of 2.9%. Durable Goods Orders declined 0.66%, while Non-durable Goods Orders rose 1.13%. The Inventory-to-Shipments Ratio declined to 1.38.
• The Chicago Purchasing Managers Association reported that, its Chicago PMI Index, a good measure of productivity in the Chicago area, rose to 43.5% - any point below 50% is a contraction. The Prices Paid Index declined, but the rest of the indices gained (and were all below 50%).
• The National Association of Purchasing Managers (NAPM) reported that, its NAPM Index rose to 47.9% in August, the highest levels it has been this year - any point above 50% is an expansion. New Orders, Production, and New Export Orders indices all rose and were above 50%. Backlog of Orders, Inventories, Employment, and Import indices also rose, but were below 50%, while Prices Paid and Supplier Deliveries declined.

• The Chicago Fed National Activity Index (CFNAI), a good measure of recession risk, improved to -0.50 in July - any point away from 1 increases recession risk. The 3-Month moving average also improved to -0.82.

• US Construction Spending declined 0.1% in July to $859.4 billion. Private Residential and Private Non Residential Office spending declines accounted for it. Public Construction was very strong for the period.

• Worldwide Semiconductor Billings declined 6.1% in July. All regions of the world saw a decline.

• US Productivity growth for Q2 2001 was revised down to a growth of 2.1%, slightly below economists estimates, but still well better than the Q1 data. Unit Labor Costs rose 2.7% for non-farm business (manufacturing had an increase of 5.1%), while Hours Worked declined 2.6%.

• The Mortgage Bankers Association (MBA) reported that its MBA Mortgage Applications Survey Index rose 11.9% to 617.8 for week ending August 31st. The Purchase Index rose 7.6% to 317.4. Refinancing again had huge gains with the Refinancing Index gaining 15.5%.

• US Vehicle Sales held steady in August at 16.5 million units sold. Light Trucks sales were the only ones showing gains. GM and Honda saw a rise in sales. Ford, Nissan and Toyota had the same sales as the month before, while DaimlerChrysler saw a decline in sales.

• US Jobless Claims declined 3,000 to 402,000 for the week ending September 1st., while the data for week ending August 25th. was revised to 405,000. The 4-week moving average rose 3,000 to 398,000.

• US Chain Store Sales rose an over the year 3.5% in August. Apparel and Department Stores sales declined, while the store types sales improved.

• The National Association of Purchasing Managers (NAPM) reported that, its Non-manufacturing NAPM Index declined 3.4% to 45.5% in August - any point below 50% is a contraction. The Imports Index rose, while the other indices declined.

• The Energy Information Agency (EIA) reported that, US crude oil inventories declined 2 million barrels in the week ending August 31st, while the American Petroleum Institute (API) saw an increase of 500,000 barrels in the same period. For Distillates, the EIA and API saw decreases of 300,000 barrels and 1.9 million barrels respectively.

• US Employment declined 113,000 jobs in August, mostly from the manufacturing sector, thus pushing the Unemployment Rate up to a surprising 4.9%. Manufacturing workweek declined 0.2%, Average Hourly Earnings rose to 0.3%, while Average Workweek held steady at 34.1.

• US Wholesale Sales rose 0.6% in July, well better than the 2 previous months, which saw declines. Inventories declined 0.7%, the highest decline this year. The Inventory-to-Sales Ratio declined to 1.32.

• The Economic Cycle Research Institute (ECRI) reported that, its Future Inflation Gauge (ECRI FIG), a good measure of future inflationary pressure, declined 3.0% in August to 99.1. Over the year, the index has declined 18%.

• US Consumer Credit was unchanged in July, well below the $4.1 billion increase economists were expecting. This this the 3rd month in a row that consumers have held back on borrowing.

• The Kansas City Fed Manufacturing Survey, a good measure of manufacturing activity in the 10th. Federal Reserve district, improved by moving from -22 to 22 in August - the first positive recording in 4 months. Price Paid for Raw Materials and Number of Employees indices declined, while the rest of the indices improved.

• The Richmond Fed Manufacturing Survey rebounded in August. The Shipments Index moved from -14 to 13, New Orders Index moved from -14 to -1, the Backlog of Orders Index moved from -35 to -29. The 6-Month Outlook Index however, declined from 40 to 27.

• The US Mortgage Bankers Association (MBA) reported that, the MBA Mortgage Applications Survey for week ending September 7th. declined 2.6% to 601.8. The Purchase Index declined 2.2% to 310.50. The Refinance Index declined 2.9% to 2295.9.

• The Energy Information Agency (EIA) and the American Petroleum Institute (API) reported that for week ending September 7th, US Crude Oil inventory rose 800,000 barrels and 22,000 barrels respectively, while Distillates gained 900,000 barrels and 1.45 million barrels respectively.

• US Current Account Balance in Q2 improved to $106.5 billion, down from the revised Q1 levels of $111.8 billion. Due to hard economic times, US Imports declined by $13.9 billion, while Exports declined by $9.1 billion.

• US Jobless Claims for week ending September 8th. rose 21,000 to 431,000. The 4-week moving average rose 11,000 to 411,000. Most economists are estimating that US Jobless Claims will increase most of the Q4 due to the Terrorist attacks.

• US Import Prices declined 0.1% in August, a smaller than expected drop due to a 1.7% increase in petroleum prices in the same period. The June Import Prices were revised to a decline of 1.5%. Over the year, August Import prices have declined 4.4%. US Export prices declined 0.2% in August, and 0.9% over the year.

• US Producer Price Index (PPI), a good measure of producer inflation, rose 0.4% in August. The Core PPI, which excludes volatile energy and food sectors, declined 0.1%.

• US Industrial Production declined 0.8% in August. Auto Production declined 2.6%, its worst showing since January. US Capacity Utilization declined from a July revised 76.9% to 76.2%. 

• US Retail Sales rose 0.3% in August, its best performance since April. Building Materials, Food & Beverages, Food Services and Drinking Places accounted for all of the gains.

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