Fed Perceived Recession on Oct. 2; Minutes of Policymakers' Meeting Boost Expections of More Rate Cuts
Federal Reserve officials concluded early last month that the Sept. 11 terrorist attacks had pushed the nation into a recession, according to minutes of an Oct. 2 policymaking session released yesterday.</br></br>Details of the minutes, including the policymakers' conclusion that the economy is in a slump, reinforced the view among many economists that the Fed is not done cutting rates. The economists generally expect the Fed to lower its target to 1.5 percent, probably in two quarter-point steps at meetings scheduled for mid-December and late January.</br></br>"The economy appeared to have been growing very little, if at all, prior to the terrorist attacks, and the dislocations arising from the [attacks] seemed to have induced a downturn in overall economic activity," the members of the Fed's top policymaking group, the Federal Open Market Committee, concluded, the minutes said.</br></br>"Looking ahead, the members generally saw a relatively mild and short contraction followed by a gradual recovery next year as a plausible forecast but one that was subject to an unusually wide range of uncertainty, notably in the direction of a potentially much weaker outcome in the nearer term," they said.</br></br>The minutes are a summary of the officials' discussions, not a transcript, and the word "recession" does not appear in the minutes. But the officials clearly were referring to a recession when they used the words, "downturn in overall economic activity" and said they foresaw a "short contraction" of the economy.