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To: Joseph G. who wrote (8852)	10/16/1998 5:19:00 PM
From: Joseph G.	Read Replies (2) \| Respond to of 86076

<<WASHINGTON, Oct 16 (Reuters) - Federal Reserve Chairman Alan Greenspan ordered Thursday's surprise cut in the U.S. federal funds rate immediately after consulting with the Fed's policy-making committee, but the group took no formal vote, a central bank spokeswoman said on Friday. ''The cut in the federal funds rate was an action taken by the chairman after consulting with the FOMC (Federal Open Market Committee),'' she told Reuters in an unusually detailed account of the Fed's decision-making process. The spokeswoman said Greenspan held a conference call with his fellow FOMC members sometime shortly after noon (1600 GMT) on Thursday before deciding to cut the fed funds rate for the second time in less than three weeks. The Fed cut the federal funds overnight bank lending rate by a quarter percentage point to 5.0 percent and the discount rate, at which the Fed makes direct loans to commercial banks, by a quarter percentage point to 4.75 percent. The move was announced at 3:14 p.m. (1914 GMT), immediately sparking a rally in financial markets. Announcing the move, the Fed said it had acted out of concern that growing caution by lenders amid mounting financial turmoil could hurt the world's largest economy. U.S. interest rates are now at their lowest level in four years. The Fed has not cut official rates between scheduled meetings of the FOMC since April 1994. Since early 1994, the Fed has adopted procedures for its regularly scheduled meetings. It has made rate decisions less stressful for financial markets by making the timing of policy announcements predictable and by giving thinly veiled warnings of imminent moves in public speeches and testimony. The Fed has a set time -- around 2:15 p.m. Eastern Time -- to inform the public on the outcome of its rate decision following regular meetings. The spokeswoman said Thursday's discount rate reduction was approved by the Fed's Board of Governors on the recommendation of regional Fed banks, as is the customary procedure. The vote was 5-0, she said. One governor, Edward Gramlich, was absent during the vote on the discount rate change, and one seat on the usually seven-member board remains vacant after the departure of former board member Susan Phillips in June. In a statement released on Thursday, the Fed said the discount rate cut had been approved on the request of eight of the 12 regional Fed banks. Those were the New York, Philadelphia, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, and San Francisco Federal Reserve banks. The Boston Fed later joined the move. The FOMC comprises the Board of Governors, based in Washington, plus heads of the regional Fed banks who vote on a rotating basis. The Fed chairman has leeway to alter the fed funds rate between regular meetings of the FOMC without consulting fellow members of the committee, which he chairs. The next FOMC meeting is scheduled for Nov. 17 and another for Dec. 22, this year's last session. Most economists expect the Fed to continue cutting interest rates well into next year as the effects of global turmoil on the U.S. economy are expected to intensify. >>