Minutes of the Federal Open Market Committee Meeting Held on March 30, 1999 - Statistical Data Included

Federal Reserve Bulletin, July, 1999 by Donald L. Kohn

A meeting of the Federal Open Market Committee was held in the offices of the Board of Governors of the Federal Reserve System in Washington, D.C., on Tuesday, March 30, 1999, at 9:00 a.m.

Present:
   Mr. Greenspan, Chairman
   Mr. McDonough, Vice Chairman
   Mr. Boehne
   Mr. Ferguson
   Mr. Gramlich
   Mr. Kelley
   Mr. McTeer
   Mr. Meyer
   Mr. Moskow
   Ms. Rivlin
   Mr. Stern

   Messrs. Broaddus, Guynn, Jordan, and Parry,
       Alternate Members of the Federal Open Market
       Committee

   Mr. Hoenig, Ms. Minehan, and Mr. Poole, Presidents
       of the Federal Reserve Banks of Kansas City,
       Boston, and St. Louis respectively

   Mr. Kohn, Secretary and Economist
   Mr. Bernard, Deputy Secretary
   Ms. Fox, Assistant Secretary
   Mr. Gillum, Assistant Secretary
   Mr. Mattingly, General Counsel
   Mr. Prell, Economist
   Ms. Johnson, Economist

   Messrs. Cecchetti, Hooper, Hunter, Lang, Lindsey,
       Slifman, Stockton, and Rosenblum, Associate
       Economists

   Mr. Fisher, Manager, System Open Market Account

   Mr. Ettin, Deputy Director, Division of Research and
       Statistics, Board of Governors

   Messrs. Madigan and Simpson, Associate Directors,
       Divisions of Monetary Affairs and Research and
       Statistics respectively, Board of Governors

   Mr. Reinhart, Deputy Associate Director, Division of
       Monetary Affairs, Board of Governors

   Ms. Low, Open Market Secretariat Assistant,
       Division of Monetary Affairs, Board of
       Governors

   Ms. Pianalto, First Vice President, Federal Reserve
       Bank of Cleveland

   Ms. Browne, Messrs. Eisenbeis, Goodfriend, Hakkio,
       Kos, Rasche, and Sniderman, Senior Vice
       Presidents, Federal Reserve Banks of Boston,
       Atlanta, Richmond, Kansas City, New York,
       St. Louis, and Cleveland respectively

   Messrs. Judd and Weber, Vice Presidents, Federal
       Reserve Banks of San Francisco and
       Minneapolis respectively

By unanimous vote, the minutes of the meeting of the Federal Open Market Committee held on February 2-3, 1999, were approved.

The Manager of the System Open Market Account reported on recent developments in foreign exchange markets. There were no open market operations in foreign currencies for the System's account in the period since the previous meeting, and thus no vote was required of the Committee.

The Manager also reported on developments in domestic financial markets and on System open market transactions in government securities and federal agency obligations during the period February 3, 1999, through March 29, 1999. By unanimous vote, the Committee ratified these transactions.

The Committee then turned to a discussion of the economic and financial outlook and the implementation of monetary policy over the intermeeting period ahead. A summary of the economic and financial information available at the time of the meeting and of the Committee's discussion is provided below. The domestic policy directive that was approved by the Committee and issued to the Federal Reserve Bank of New York follows the summary.

The information reviewed at this meeting suggested that the economic expansion remained robust early in the year. Consumer spending was particularly strong, and housing starts climbed higher. While growth of business capital spending moderated somewhat after a fourth-quarter surge, it was still quite rapid. Heavy competition from imports damped the rise of industrial production; however, employment expansion remained brisk and labor markets tight. Price inflation was still low.

Nonfarm payroll employment posted sizable further gains in January and February. Hiring in construction and retail trade was notably strong, and employment in the service industries continued to trend higher. By contrast, manufacturing suffered further job losses. The civilian unemployment rate, at 4.4 percent in February, stayed in the narrow 41/4 to 41/2 percent range that had prevailed since spring 1998.

Total industrial production was unchanged in January and rose slightly in February. Gas and oil extraction slumped in January, and mild weather restrained utility output in February. Manufacturing production increased modestly in both months, reflecting strong increases in the output of high-tech industries that more than offset declines in the production of aircraft and of motor vehicles and parts. The factory operating rate fell further in the January-February period, as the growth in manufacturing capacity continued to outpace the rise in production.

Consumer spending surged in the early months of 1999, supported by rapidly rising disposable personal income, soaring household net worth, and buoyant consumer sentiment. Attractive pricing and the favorable trends in income and wealth contributed to strong underlying demand for motor vehicles, and substantial gains were recorded in most other categories of retail sales as well. Expenditures on services in January (latest available data) also exhibited strength, most notably in spending for energy services, which picked up after an unseasonably warm December.