OC1 --
The Federal Reserve's report to Congress is a semi-annual review,
which is highly watched. In fact, the Fed's monetary policy is very
closely watched because of its impact on interest rates -- a key
determinate of the value of stocks and bonds in the U.S.
The Federal Reserve chairman testifies to Congress twice each year at
the same time that the report is given. Here are Alan Greenspan's
most-recent comments and the most-recent report. His report went to
the Senate's Committee on Banking, Housing, and Urban Affairs:
Federal Reserve Bank
"Testimony of Chairman Alan Greenspan," (Feb. 12, 2004)
http://www.federalreserve.gov/boarddocs/hh/2004/february/testimony.htm
"Monetary Policy Report to Congress," (Feb. 11, 2004)
http://www.federalreserve.gov/boarddocs/hh/2004/february/fullreport.htm
In between reports to Congress, direction of monetary policy is
determined by the Federal Reserve's Open Market Committee (FOMC),
which is composed of the Board of Governors and a select number of
Federal Reserve bank presidents. Like the report to Congress (and
especially the Fed chairman's remarks), the discussions of the FOMC
are watched carefully by financial markets for indications of the
concerns of these economists over structure of the American economy:
Federal Open Market Committee (March 18, 2004)
http://www.federalreserve.gov/fomc/
As the Federal Reserve pages note, the Fed has control over three
elements of monetary policy. Best-known is the discount rate:
"The Discount Rate" (Feb. 9, 2004)
http://www.federalreserve.gov/monetarypolicy/discountrate.htm
Open market operations are the Feds' actions taken to buy or sell
federal debt, which establishes the base "risk free" rate important to
all stock and bond values:
"Open Market Operations" (Oct. 28, 2003)
http://www.federalreserve.gov/fomc/fundsrate.htm
And finally, the reserve requirements are the percentage of funds that
banks are required to hold in cash or near-cash funds against the
total of bank liabilities:
"Reserve Requirements" (March 8, 2004)
http://www.federalreserve.gov/monetarypolicy/reservereq.htm
SUMMARY OF THE 2/11/2004 REPORT
-----------------------------------------------------
Chairman Greenspan told Congress on Feb. 12 that in the judgment of
the Federal Open Market Committee and himself (he's the chair of the
committee), the economy in 2003 improved in several measures:
* continued productivity increases of 5.25% in non-farm sectors
* continuation of debt reduction in corporate and personal portfolios,
accompanied by a rise in credit quality
* growth in M2 (money supply) of 5.25% -- about matching productivity gains
As a result, Greenspan said, "All told, our accommodative monetary
policy stance to date does not seem to have generated excessive
volumes of liquidity or credit" and the Fed "fiscal policy will stay
expansionary, on net, through this year."
Greenspan's worries: depreciation of the dollar of about 13% against
foreign currencies since 2002; the high federal budget deficit
following years of surpluses; and trade protectionism.
WHAT'S THE FED DONE SINCE FEB. 11?
---------------------------------------------------------
The Federal Reserve subsequently met on March 16, deciding to hold
interest rates steady for now -- but indicating that a rise in rates
may be necessary. This is the Associated Press report of Fed action:
Buffalo News
"Federal Reserve Holds Interest Rates Steady," (Crutsinger, Mar. 17, 2004)
http://www.buffalonews.com/editorial/20040317/1042186.asp
And here's the Open Market Committee's own press release:
Press Release (Mar. 16,. 2004)
http://www.federalreserve.gov/boarddocs/press/monetary/2004/20040316/default.htm
Google search strategy:
"Federal Reserve" + "monetary policy"
For recent actions, using a Google news search
(http://news.google.com) will give a quick update of Fed actions since
the semi-annual report:
"Federal Reserve" + "interest rates"
Best regards,
Omnivorous-GA |
