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Fed saw slowing in June
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August 23, 2001: 2:51 p.m. ET
Policy makers voted 9-1 to cut rates, counter lower employment, spending
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NEW YORK (CNNfn) - Federal Reserve policy makers saw a slowdown in several key components of the U.S. economy in the second quarter, leading them to cut interest rates in June, according to minutes of the Fed's June meeting, released Thursday.
The Fed cut a quarter percentage point from its target for the federal funds rate, an overnight bank lending rate, on June 27 after a two-day policy meeting, its sixth cut of the year in an effort to fend off a recession.
In the minutes, the Fed said it focused on falling employment and industrial output, slowing consumer-spending growth and business spending before voting 9-1 to cut rates again.
"The information reviewed at this meeting suggested that economic activity continued to grow little, if at all, in the second quarter," the minutes said.
Fed policy makers also worried that corporate profits still were at risk, which could lead to falling stock prices and more job cuts, both of which could erode consumer and business spending. Consumer spending is important to the Fed because it fuels two-thirds of the U.S. economy.
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The Fed, which is charged with keeping inflation at bay, also noticed that energy prices had flattened, though at a high level, and core price inflation -- inflation minus volatile food and energy prices -- had fallen. Fed Chairman Alan Greenspan hasn't been concerned about inflation for some time, meaning he felt the Fed was free to cut rates again if necessary.
While William Poole, president of the Federal Reserve Bank of St. Louis, was the only policy maker to formally oppose the rate cut, others shared his concern that the Fed was close to pumping too much money into the economy.
"In the view of a number of members, the Committee might well be near the end of its easing cycle," the minutes said.
The Fed cut an additional quarter point after its Aug. 21 meeting, but the minutes of that meeting will not be available until after the Fed's Oct. 2 meeting.
Economists are divided about what the Fed will do after the October meeting. An Aug. 16 Reuters poll found only 12 of 25 "primary dealers" -- investment banks that trade directly with the Fed in fixed-income markets -- expected another quarter-percentage-point rate cut by the end of the year. 
- from staff and wire reports
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Fed policy meeting minutes - June 26-27, 2001
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