Announcements

Federal Reserve Bulletin, Jan, 2000

ACTION BY THE FEDERAL OPEN MARKET COMMITTEE AND AN INCREASE IN THE DISCOUNT RATE

The Federal Open Market Committee on November 16, 1999, voted to raise its target for the federal funds rate by 25 basis points to 5 1/2 percent. In a related action, the Board of Governors approved a 25 basis point increase in the discount rate to 5 percent.

Although cost pressures appear generally contained, risks to sustainable growth persist. Despite tentative evidence of a slowing in certain interest-sensitive sectors of the economy and of accelerating productivity, the expansion of activity continues in excess of the economy's growth potential. As a consequence, the pool of available workers willing to take jobs has been drawn down further in recent months, a trend that must eventually be contained if inflationary imbalances are to remain in check and economic expansion continue.

Today's increase in the federal funds rate, together with the policy actions in June and August and the firming of conditions more generally in U.S. financial markets over the course of the year, should markedly diminish the risk of inflation going forward. As a consequence, the directive the Federal Open Market Committee adopted is symmetrical with regard to the outlook for policy over the near term.

In taking the discount rate action, the Federal Reserve Board approved requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, Cleveland, Richmond, and Kansas City. Subsequently the Board approved similar requests by the board of directors of the Federal Reserve Bank of San Francisco, also effective on November 16; by the boards of directors of the Federal Reserve Banks of Atlanta and Dallas, effective November 17; and by the boards of directors of the Federal Reserve Banks of St. Louis, New York, Philadelphia, Chicago, and Minneapolis, effective November 18. The discount rate is the rate charged depository institutions when they borrow short-term adjustment credit from their District Federal Reserve Banks.

MODIFICATIONS TO THE SETTLEMENT FINALITY FOR ACH CREDIT TRANSACTIONS PROCESSED BY FEDERAL RESERVE BANKS

The Federal Reserve Board on November 12, 1999, approved modifications to the settlement finality for automated clearinghouse (ACH) credit transactions processed by the Federal Reserve Banks so that settlement becomes final when posted to depository institutions' accounts. The Board will require prefunding for any ACH credit transactions that settle through a Federal Reserve account that is being monitored in real time to help manage settlement risk.

The Reserve Banks will be modifying their software and their ACH operating circular to implement settlement-day finality. To permit time for these changes, settlement-day finality and prefunding will be implemented in early 2001. A specific implementation date will be announced three months in advance of the effective date.

ADJUSTMENT OF THE DOLLAR AMOUNT THAT TRIGGERS CERTAIN DISCLOSURE REQUIREMENTS UNDER THE TRUTH IN LENDING ACT

The Federal Reserve Board on November 3, 1999, published its annual adjustment of the dollar amount that triggers additional disclosure requirements under the Truth in Lending Act for mortgage loans that bear fees above a certain amount.

The Board has adjusted the dollar amount from $441 for 1999 to $451 for 2000 based on the annual percent change reflected in the consumer price index that was in effect on June 1, 1999. The adjustment is effective January 1, 2000.

The Home Ownership and Equity Protection Act of 1994 bars credit terms such as balloon payments and requires additional disclosures when total points and fees payable by the consumer exceed $400 (to be adjusted annually) or 8 percent of the total loan amount, whichever is larger.

PROPOSED ACTION

The Federal Reserve Board on November 3, 1999, published proposed revisions to the official staff commentary that applies and interprets the requirements of Regulation Z (Truth in Lending). Comments are requested by January 10, 2000.

REVIEW OF PUBLICATIONS ACTIVITIES OF THE FEDERAL RESERVE BOARD

The Federal Reserve Board on November 3, 1999, announced a review of its publications activities. As part of this effort, the Board is seeking public comment on how the Board's publications are individually and collectively meeting information needs and to offer suggestions for improving or possibly eliminating some publications or adding new ones. Comments are requested by December 17, 1999.

SURVEY RESULTS ON CONSUMER CONFIDENCE IN BANKS' Y2K PREPARATIONS

The Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) announced on November 18, 1999, the results of a survey by the Gallup Organization. According to the survey, current figures indicate that nine out of ten U.S. bank customers believe that their banks are ready for the Year 2000--or Y2K. By comparison, a March survey found that an estimated 76 percent of bank customers were confident that their banks would solve the Y2K problem.

Both surveys were sponsored by federal financial institution regulatory agencies. The Federal Reserve Board and the FDIC sponsored the current survey, which was delivered to the agencies on November 15, 1999. The results, which are based on about 1,400 completed interviews, are from an ongoing survey of adult Americans who have bank accounts.