Announcements - meshed briefs

Federal Reserve Bulletin, May, 2003

FEDERAL OPEN MARKET COMMITTEE DIRECTIVE

The Federal Open Market Committee decided on March 18, 2003, to keep its target for the federal funds rate unchanged at 1 1/4 percent.

While incoming economic data since the January meeting have been mixed, recent labor market indicators have proven disappointing. However, the hesitancy of the economic expansion appears to owe importantly to oil price premiums and other aspects of geopolitical uncertainties. The Committee believes that as those uncertainties lift, as most analysts expect, the accommodative stance of monetary policy, coupled with ongoing growth in productivity, will provide support to economic activity sufficient to engender an improving economic climate over time.

In light of the unusually large uncertainties clouding the geopolitical situation in the short run and their apparent effects on economic decisionmaking, the Committee does not believe it can usefully characterize the current balance of risks with respect to the prospects for its long-run goals of price stability and sustainable economic growth. Rather, the Committee decided to refrain from making that determination until some of those uncertainties abate. In the current circumstances, heightened surveillance is particularly informative.

Voting for the FOMC monetary policy action were Alan Greenspan, Chairman; William J. McDonough, Vice Chairman; Ben S. Bernanke; Susan S. Bies; J. Alfred Broaddus, Jr., Roger W. Ferguson, Jr., Edward M. Gramlich; Jack Guynn, Donald L. Kohn, Michael H. Moskow, Mark W. Olson, and Robert T. Parry.

REVISIONS TO OFFICIAL STAFF COMMENTARY ON REGULATION Z

The Federal Reserve Board on March 28, 2003, issued revisions to the official staff commentary that applies and interprets the requirements of Regulation Z, which implements the Truth in Lending Act.

The commentary revisions discuss the status of certain credit-card-related fees and the rules for replacing an accepted credit card with one or more cards.

In addition, the commentary revisions discuss the disclosure of private mortgage insurance premiums and the selection of Treasury security yields for determining whether a mortgage loan is covered by provisions in Regulation Z that implement the Home Ownership and Equity Protection Act.

At the time the proposed commentary revisions were published in December 2002, the Board also requested comment and information from the public about the design and operation of overdraft or "bounced check" protection services. Board staff is continuing to gather information on these services and will determine at a later date whether additional guidance for financial institutions is warranted under Regulation Z or other laws.

The revisions are effective April 1, 2003. The date for mandatory compliance is October 1, 2003.

JOINT FEDERAL RESERVE AND TREASURY REPORT ON GLOBAL COUNTERFEITING

The Federal Reserve Board and the Treasury Department on March 14, 2003, issued a joint report to Congress stating that procedures to combat international counterfeiting of U.S. currency are becoming more effective.

U.S. dollars are held and widely used around the world, and the popularity and ubiquity of the dollar make it a potential target for counterfeiters. The incidence of counterfeiting has declined markedly with the introduction of the 1996-series currency. An upcoming new series currency, to be introduced later this year, will further enhance the security of U.S. banknotes.

The report, The Use and Counterfeiting of United States Currency Abroad, Part II, mandated by the Congress as part of the Anti-Terrorism and Effective Death Penalty Act of 1996, represents a comprehensive review of the international use and counterfeiting of U.S. currency. The report details how the combined efforts of the Treasury, United States Secret Service, and Federal Reserve have held the incidence of counterfeiting at relatively low nominal levels.

"We continue to improve our currency and resist efforts by counterfeiters the world over to produce and pass counterfeit U.S. notes," said Treasury Secretary John W. Snow. "Only by such efforts can we guarantee that our currency will continue to remain a symbol of American strength and stability."

"U.S. currency continues to hold an important place in the payment system at home and abroad and maintaining its integrity is of utmost concern to the Federal Reserve," said Roger Ferguson, Vice Chairman of the Board of Governors of the Federal Reserve System. "A secure currency precludes the need for businesses, merchants and the public to expend significant resources and time validating the genuineness of currency. When payment systems work well, the economy functions more efficiently."

This second report to the Congress on the use and counterfeiting of U.S. currency abroad provides further evidence that improved note designs have been more difficult for counterfeiters to copy. The result has been much smaller proportions of counterfeits of new design notes among notes processed at Federal Reserve Banks.