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FOMC Meeting date: NEXT MEETING: JANUARY
29/30TH. 2002
MEETING
OUTCOME
-
LATEST
NEWS: The Federal Reserve FOMC and the Board
of Governors on Wednesday January 30th. left
the Federal Funds Rate, the interest rate
banks charge each other for overnight loans,
UNCHANGED at 1.75%, and the Federal Discount
Rate, the interest rate the Federal Reserve
charges banks on loans, also UNCHANGED at
1.25%. The Feds seem to believe the economy
has turned the corner.
Please visit our
ARCHIVES for previous issues.
MEETING AGENDA:
- The
Federal Reserve Bank FOMC will consider either
LEAVING interest rates as they are, or LOWERING
them for a good measure, now that the economy
is showing signs of a recovery. In 2001 alone,
the FOMC cut interest rates 11 times.
BOARD MEMBERS' RECENT COMMENTS
- Federal
Reserve Chairman stated at a Congressional
Hearing (see below) on January 24th. that
his comments of January 11th. were viewed
too pessimistic. Commenting about the markets'
excitement of a quick recovery, he stated
that the markets ''...had been assuming a
far more rapid snap-back than I, frankly,
think is likely to happen".
- Federal
Reserve Bank of Dallas President and voting
member of the FOMC, Robert McTeer, told reporters
after addressing Rotary Club of Greenville
Texas on January 23rd. that he thinks the
American Bankers Association's 2002 GDP growth
forecast of 2.2% are "...realistic, but
they may be a little bit too conservative".
President McTeer continued "I think the
weakness in the first half will probably be
offset by more strength in the second half".
- Federal
Reserve Bank of Dallas President and voting
member of the FOMC, Robert McTeer, stated
in a speech to the San Antonio Chamber of
Commerce on January 22nd. that the US economy
is "certainly looking much better than
2 months ago".
- Federal
Reserve Bank of Chicago President and non-voting
FOMC member, Michael Moskow stated on January
18th. that the holiday shopping season was
better than expected, and that "manufacturing
is still slow, but there are signs that it
may be bottoming out".
- Federal
Reserve Bank of New York President and voting
member of the FOMC, William McDonough told
a gathering of Arab Bankers of North America
in New York City on January 17th. stated concerning
when the recession will be over that, it is
hard to pinpoint, or "...exactly how
robust it will be coming out of it".
- Federal
Reserve of Richmond President and non-voting
FOMC member, Alfred Broaddus, told a gathering
of risk managers association in Raleigh North
Carolina on January 17th. that he thinks "...there
is a good chance that the economy might at
least be a little softer than the consensus
over the next year or so". Speaking about
durable capital goods orders excluding defense
related goods, that when "...you see
this number increase, that is going to strengthen
the prospects that business spending is beginning
to bottom out". President Broaddus also
make clear the need for consumer spending
and a "highly stimulative" economic
policy to help the recovery to continue.
- Federal
Reserve Bank of San Francisco President, and
non-voting FOMC member, Robert Parry, told
a Los Angeles Real Estate gathering on January
16th. that when the economic "...data
are mixed like this, the uncertainty about
the near term outlook is good". President
Parry was however, concerned about the rising
unemployment rate which could take its toll
on consumer confidence and spending, but injected
that he wouldn't "...rule out flat or
slightly positive growth in the first quarter
of this year".
- Federal
Reserve Bank of Minneapolis President and
voting member of the FOMC, Gary Stern, stated
in a speech to Medical Alley, a Minnesota
healthcare non-profit support group, on January
14th. in Minneapolis that "I expect economic
growth to resume in the second quarter of
this year, but probably not before" He
continued that the "economic growth will
gather momentum over the second half of this
year and probably into 2003 as well"
President Stern expressed satisfaction about
consumer spending in the near term, and that
the state of the economy will not be believed
until they see it gather momentum.
- Federal
Reserve Bank of New York President and voting
member of the FOMC, William McDonough stated
in his address to the Institute of International
Bankers in New York City on January 14th.
that opinions vary as to whether the economic
"..recovery will be sort of strong, fairly
strong, or very strong", and he added
"I would love to know the answer to that
question".
- Federal
Reserve Bank of Chicago President and non-voting
FOMC member, Michael Moskow, stated in a speech
to the Mid America Club in Chicago on January
14th. that "the economy will recover,
but as I noted, the signs are still preliminary
and the timing uncertain". President
Moskow also expressed concerns about whether
consumers will still be spending if job cuts
continue to mount. Moskow added that "....of
course, not all risks to the household sector
forecast are on the downside. Generous retail
discounts and low interest rates could boost
spending more than expected".
- Federal
Reserve chairman Alan Greenspan stated in
a prepared speech in San Francisco before
the Bay Area Council Conference of local corporate
executives on January 11th. that the US economy
looks good long term ".....there are
sound reasons for concluding that the long-run
picture remains bright.....". But, he
continued, "I would emphasize that we
continue to face significant risks in the
near term".
- Federal
Reserve Bank of Dallas President and voting
member of the FOMC, Robert McTeer, told the
Texas Association of Business and Chamber
of Commerce in a Fort Worth, Texas speech
on January 9th. that "before an economy
can rebound, it has to stop declining. This
is what we are doing. We are in the process
of forming the bottom". President McTeer
continued that, "the good news is after
10 or 11 months when there was no improvement
in the numbers, suddenly the numbers are mixed".
- Federal
Reserve Board Vice Chairman and voting FOMC
member, Roger Ferguson, told journalist after
a speech in Geneva, Switzerland on January
8th. that "..while data has been mixed,
it is too early to have a strong conviction
about exactly what contours a turnaround in
the US economy are likely to be".
- Federal
Reserve Bank of New York President and Vice
Chairman of the FOMC ( and a voting member),
William McDonough, told reporters after a
speech in Frankfurt Germany on January 8th.
that "the economy is giving signals that
the economy is at or near the bottom"
of the recession. President McDonough expressed
concerns about the weak business investment
market.
- Federal
Reserve Bank of Philadelphia President and
voting FOMC member, Anthony Santomero, stated
in a speech at the Philadelphia Chamber of
Commerce on January 8th. that the economy
is getting back to pre-September 11th. days
by "..beginning to give mixed economic
signs. This is a good sign, and an indication
the economy may be preparing to resume growth".
President Santomero cautioned that the recovery
might take longer than most analysts think.
- Federal
Reserve Bank of Richmond President, and non-voting
member of the FOMC, Alfred Broaddus, stated
at a Virginia State Budget discussion in Richmond
on January 8th. that the consensus estimates
about the recovery are about right, "....but,
I think there is a good chance that the economy
may be at least a little softer than the consensus
over the next year or so".
- Federal
Reserve Bank of Atlanta President, and non-voting
FOMC member, Jack Guynn, told reporters in
Atlanta after a Rotary Club Luncheon on January
7th. that although there are hints the economy
is stabilizing, he is "..not ready to
declare that things have stabilized, much
less turned around". President Guynn
feels that the Feds could still cut interest
rates since it has "some more room and
if we feel we need it, my presumption is that
we will use it".
Board
Members Testimonies and Speeches page
THE GENERAL CONSENSUS ABOUT COMING MEETING:
- Most
economists are divided on a HOLD or ONE MORE
CUT, after Federal Reserve Chairman Alan Greenspan
suggested his comments about the economy might
have been seen as being too pessimistic.
- OUR
VIEW: We Think the Feds will cut one more
time ( at least one of 2 key interest rates)
for a good measure - their public pronouncements
seem to favor at least one more cut. Then
again, anything is possible this time around!
RECENT
ECONOMIC DATA RELEASES (from old to newer data):
-
US
Trade deficit improved by $12.9 billion in
Q3 2001, as the Current Account deficit declined
to $95 billion.
-
The
Energy Information Administration (EIA) reported
that, US crude oil inventories declined 2.4
million barrels, while Distillates rose 2.3
million barrels for the week ending December
7th.
-
The
Mortgage Bankers Association (MBA) reported
that, for week ending December 7th, its MBA
Mortgage Applications Survey Index declined
7% to 693.2. The Purchase Index declined to
342.7, and the Refinance Index declined to
2731.6. The 30-year Fixed Mortgage Rate rose
to 7.11%.
-
US
Import Prices declined 0.4% in November, while
Export Prices declined 0.6% for the same period.
-
US
Jobless Claims for weekending December 8th.
declined a strong 86,000 to 394,000. The 4
week moving average declined 12,000 to 450,000.
-
US
Producer Price Index (PPI), a good measure
of manufacturer inflation, declined 0.6% in
November. The Core PPI, which excludes the
energy and food sectors, rose a higher than
expected 0.2% for the period.
-
US
Retail Sales declined a wider than expected
3.7% in November, as retail and food services
saw their worst monthly decline since 1992.
-
US
Industrial Production declined a mere 0.3%
in November, which was smaller than what have
been seen in the last few months. US Capacity
Utilization declined 3.3% over the month to
74.7%.
-
US
Consumer Price Index (CPI), a good measure
of consumer inflation, was unchanged in November.
The Core CPI, which excludes the energy and
food sectors, rose a surprising 0.4% for the
period.
-
US
Business Inventories declined 1.4% in October,
while Business Sales rose 2.7% for the period,
thus pushing the Inventory-to-Sales Ratio
down sharply to 1.39.
-
The
National Association of Home Builders (NAHB)
reported that its Housing Market Index for
December rose a strong 8 points to 57. The
Single-family Sales Index rose 8 points to
60, while its 6 Month Outlook Index rose 10
points to 64. Traffic of Prospective Buyers
rose 8 points to 46.
-
US
New Residential Construction rose 8.2% to
1.65 million units in November. Permits and
Starts also gained. The Midwest and West led
in gains with 20% and 13% gains respectively.
-
The
Conference Board reported that its Index of
Leading Economic Indicators rose a stronger
than expected 0.5% in November. The Coincident
Index declined 0.2%, while the Lagging Index
declined 0.7%.
-
US
International Trade Deficit worsened $10.4
billion in October to $29.4 billion.
-
The
Mortgage Bankers Association (MBA) reported
that for week ending December 14th, its MBA
Mortgage Applications Survey Index declined
18.9% to 562.4. The Purchase Index declined
to 320.6, while the Refinance Index declined
to 1968.8. The 30-year fixed mortgage rate
rose to 7.23%.
-
The
Energy Information Administration (EIA) reported
that for week ending December 14th, US Crude
Oil inventories rose 400,000 barrels,
while Distillates declined 1.6 million barrels.
-
The
Philadelphia Fed Survey improved from November's
-20.2 to December's -5.5.
-
US
Jobless Claims for weekending December 15th.
declined a surprising 11,000 to 384,000. The
4-week moving average declined 12,250 to 438,000.
-
The
University of Michigan Consumer Sentiment
Index rose to a strong 88.8 in December. The
Current and Future Conditions outlooks also
rose.
-
US
Personal Income declined 0.1% in November,
while Personal Consumption Expenditures declined
0.7%.
-
US
Gross Domestic Product (GDP) for Q3 2001 was
revised downward to a decline of 1.3%, due
mostly to declines in Exports, Imports and
Government expenditures.
-
US
Semiconductor Book-to-Bill Ratio rose to 0.73
in November, as new orders declined faster
than billings for shipped orders.
-
The
Conference Board reported that for month of
November, the US Help Wanted Index, a good
measure of blue collar workers demand, declined
to 45, its lowest reading since the mid 1960s.
-
The
Mortgage Bankers Association (MBA) reported
that, for the week ending December 21st.,
the MBA Mortgage Applications Survey Index
declined 2.5% to 548.2. The Purchase Index
rose to a record 373.5, while the Refinance
Index declined to 1564.4. The 30-year fixed
mortgage rate declined 10 basis points to
7.13%.
-
The
Conference Board reported that US Consumer
Confidence rose to 93.7 in December, its first
rise since June, and well above analysts estimates.
-
US
New Home Sales rose to 934,000 units in November,
its largest gain in over 3 quarters.
-
US
Existing Home Sales rose 0.6% to 5.21 million
in November. The rise in Existing Single Home
sales is now poised for a record year.
-
US
Jobless Claims for week ending December 22nd.
rose a lower-than-expected 7,000 to 392,000.
The 4 week moving average declined 25,250
to 413,250.
-
US
Orders for Durable Goods declined 4.8%, or
$8.8 billion to $175.6 billion in November.
Shipments rose 0.2% to $180.7 billion, while
Inventories declined 1.1% to $286.7 billion.
-
The
Chicago Purchasing Managers Association (PMA)
reported that its Chicago PMI Index rose 30
basis points (0.30%) to 41.4% - any point
below 50% is a contraction.
-
The
Energy Information Administration (EIA) reported
that for week ending December 21st, US crude
oil inventories rose 2.6 million barrels,
while Distillates inventories declined 1.7
million barrels.
-
US
Agricultural Prices were unchanged in December.
-
Worldwide
Semiconductor Sales rose 1.5% in November.
Europe and Asia saw increases, North America
held steady, while Japan saw a decline again.
-
The
Institute of Supply Management (ISM), formerly
known as The National Association of Purchasing
Managers (NAPM), reported that its PMI in
December, a good measure of manufacturing
activity in the nation, rose to a better-than-expected
48.2 in December, well better than the 44.5
seen in November.
-
US
Construction Spending rose 0.8% in November,
due mostly to public construction. Private
Residential Construction declined.
-
The
Mortgage Bankers Association (MBA) reported
that, its MBA Mortgage Applications Survey
for weekending December 28th. 2001 declined
39.9% to 329.6. The Purchase Index declined
to 220.6. The Refinance Index declined to
963.5. The 30-year Fixed Mortgage Rate declined
slightly to 7.12%.
-
US
Jobless Claims for weekending December 29th.
rose 36,000 to 447,000. The 4-week moving
average declined 8,250 to 409,750.
-
The
Energy Information Administration (EIA) reported
that for weekending December 28th, US Crude
Oil Inventory declined 2.2 million barrels,
while Distillates rose 600,000 barrels.
-
US
Payroll Jobs declined 124,000 in December,
while the November losses were revised upward
to a loss of 371,000. The December Unemployment
Rate was reported at 5.8%, while the November
level was revised downward from 5.7% to 5.6%.
-
The
Institute of Supply Management (ISM) formerly
known as the National Purchasing Managers
Association (NAPM) reported that its December
PMI Non-manufacturing Index rose to 54.2%,
well above estimates - any point above 50%
indicates an expansion.
-
US
Factory Orders declined 3.3% in November.
Non-defense capital goods like IT services
gained 5.0%, the second monthly gain in a
row.
-
US
Consumer Credit grew 14.6% to $19.8 billion
in November. Non-revolving credit accounted
for most of the gains due to new car sales.
-
The
Richmond Fed Survey worsened in December to
-25.0.
-
The
Mortgage Bankers Association (MBA) reported
that for weekending January 4th, its MBA Mortgage
Applications Survey rose 29.9% to 570.7. The
Purchase Index rose to 375.9. The Refinance
Index rose to 1703.7. The 30-year Fixed Mortgage
Rate declined to 7.04%.
-
The
Energy Information Administration (EIA) announced
that for weekending January 4th, US Crude
Oil inventories rose 0.4%, or 1.2 million
barrels, while Distillates rose 3.3%, or 4.6
million barrels.
-
US
Chain Store Sales gained a stronger than expected
2.3% in December.
-
US
Wholesale Trade Sales was unchanged in November,
while Inventories declined 1.1%. The Inventory-to-Sales
Ratio was at 1.30.
-
US
Import Prices declined 0.9%, due mostly to
a 6.3% decline in Petroleum Prices. US Export
Prices declined only 0.2% in the same period.
-
US
Jobless Claims for weekending January 5th.
declined 56,000 to 395,000. The 4-week moving
average declined 250 to 410,500, after adjusting
last week's figures.
-
US
Producer Price Index (PPI), a good measure
of producer inflation, declined 0.7% in December,
due mostly to lower energy costs. The Core
PPI, which excludes the volatile Energy and
Food sectors, declined 0.1%.
-
The
Kansas City Fed Manufacturing Survey worsened
in December to -21.0.
-
US
Retail Sales declined 0.1% in December, which
was a better performance than expected. Over
the year, retail sales rose 1.6%.
-
US
Industrial Production declined only 0.1% in
December, in line with expectations. Capacity
Utilization declined 10 basis points (.10%)
to 74.4%.
-
The
National Association of Home Builders (NAHB)
reported that, its NAHB Housing Market Index
rose 4 points to 61 in January, its highest
level since November 2000. Single Family Home
Sales Index rose to 64, the 6-month Outlook
rose to 67, while the Traffic of Prospective
Buyers rose to 50.
-
The
US Consumer Price Index (CPI), a good measure
of consumer inflation, declined 0.2% in December.
The Core CPI, which excludes the volatile
energy and food sectors, rose a mere 0.1%.
-
US
Business Inventories declined 1.0% in November,
while the Inventory-to-Sales Ratio held steady
at 1.39.
-
The
Mortgage Bankers Association (MBA) reported
that for week ending January 11th, its MBA
Mortgage Applications Survey rose 1.9% to
581.7. The Purchase Index declined to 348.6,
and the Refinance Index rose to 1937.6. The
30-year fixed mortgage rate declined to 6.76%.
-
The
Energy Information Administration (EIA) reported
that for weekending January 11th, US Crude
Oil inventories rose 1 million barrels, while
Distillates declined 300,000 barrels.
-
US
Housing Starts declined 3% in December to
$1.57 million units. Building Permits rose
4% to 1.653 million.
-
The
Philadelphia Fed Manufacturing Survey rose
to 14.7% in January.
-
The
Manufacturers Alliance/MAPI Survey was unchanged
in Q4 2001 to stand at 40%.
-
US
Jobless Claims for weekending January 12th.
declined 14,000 to 384,000. The 4 week moving
average declined 250 to 411,000.
-
US
International Trade Deficit improved in November
by declining to $27.9 billion, as Capital
Goods Deficit declined by $1.1 billion. US
Exports rose $0.6 billion, as Imports declined
$0.9 billion.
-
The
University of Michigan reported that, its
Consumer Sentiment Survey rose to 94.2% in
January, its highest level in 12 months, despite
a slight decline in the Present Conditions
component of the survey.
-
The
Conference Board reported that the US Leading
Economic Indicators rose 1.2% in December.
The Coincident Index rose by 0.1%, while the
Lagging Index declined by 0.1% in the same
period.
-
The
SEMI reported that, December bookings for
semiconductor manufacturing equipment by US
makers rose 7%, and Shipments also rose, as
the Book-to-Bill Ratio came in at 0.78.
-
The
Mortgage Bankers Association (MBA) reported
that, for week ending January 18th, its MBA
Mortgage Applications Survey rose 24.4% to
723.4. The Purchase Index rose to 371.8, while
the Refinance Index rose to 2768.3. The 30-year
Fixed Mortgage Rate rose to 6.92%.
-
For
weekending January 18th, US Jobless Claims
declined 15,000 to 376,000. The 4-week moving
average declined 8,750 to 404,250.
-
The
Energy Information Administration (EIA) reported
that for weekending January 18th, US crude
oil inventory rose 2.7 million barrels, while
Distillates declined 2.9 million barrels.
-
US
Existing Home Sales declined 0.8% to 5.19
million units in December.
-
US
New Residential Single Family Home Sales rose
6% in December to 946,000 units, while the
November figures were revised to 895,000.
-
The
Conference Board reported that US Consumer
Confidence rose to 97.3 in January, well higher
than the December level of 94.6.
-
US
Durable Goods Orders rose a strong 2.0% in
December, due to strong orders for Commercial
Aircraft and Semiconductors.
BEIGE BOOK (12 DISTRICTS) REPORT
OF JANUARY 16TH. 2002
- The
US economy was weak, but were signs it is
turning the corner.
- The
First District (Boston) reported that manufacturing
is stabilizing and expect some recovery by
middle part of the year. Tourism and Discount
retailers are hoping for a recovery next year.
-
The Second district (New York) reported that
Manhattan office space availability is stabilizing.
Condominiums and Co-Ops did better in the
last 2 months of the year. Rents have dropped
about 10% below last year's levels.
- Third
district (Philadelphia) reported that holiday
sales, especially in electronics and gaming
gear, was above expectations. Manufacturers
are looking for a recovery by mid year, and
some have already started ordering capital
goods. On the downside, retailers and factory
shipments are still strung out (factory shipments
have actually been declining).
- Fourth
district (Cleveland) reported that they are
seen signs of an emerging recovery. Holiday
sales was robust, construction is strong,
and some factories in the region are seen
some increase in business activities.
- The
Mid-Atlantic Fifth District (Richmond) reported
that demand for temporary workers is strong,
but permanent employees continue to be let
go. Manufacturers are expecting a recovery
to start in mid year.
- Southeastern
Sixth District (Atlanta) reported that some
businesses have seen a pick up in business
recently, actually enough to recall some of
their workers back. Residential construction
is still strong, but retail sales and tourism
is still poor.
- The
Seventh (Chicago) reported that the 0% car
financing deal saw vehicle sales that were
above expectations, despite disappointing
general retail sales and consumer spending.
Manufacturing is still weak, but construction
was at least mixed.
-
The Eighth district (St Louis) reported that
home sales were strong as people took advantage
of the low interest (and mortgage) rates.
A still slowing manufacturing sector, and
mortgage delinquencies were a concern.
-
The Ninth District (Minneapolis) reported
that residential construction and consumer
spending were robust. Auto sales and retail
sales were strong, but manufacturing and tourism
was down.
- Tenth
District (Kansas City) reported that retail
sales was better than expected, and that although
vehicle sales declined, they still did better
than the year before.
- The
Eleventh District (Dallas) reported that the
high tech sector saw an increase in demand
for their services. Manufacturing was weak,
but rising medical, property and liability
insurance costs were a concern. On the upside,
businesses seem to be expecting a mid year
recovery.
- The
Twelfth District (San Francisco) reported
that housing sales and financial services
industries are still doing okay. Prices and
wage pressures are abating. Retail sales and
manufacturing are still struggling.
HUMPHREY-HAWKINS (CONGRESSIONAL
TESTIMONY) REPORT OF JANUARY 24th. 2002
- The
US Economy is at a particular turning point.
- The
economic rebound will be less robust because
the recession was a mild one.
- Economy
will recover with, or without a stimulus package.
- Chairman
Greenspan again stated need for a mechanism
to trigger tax cuts and higher spending when
in budget surplus periods.
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