Fed officials reportedly furious about news leak from meeting

May 22, 1992|By Bloomberg Business News

NEW YORK -- One of the 12 Federal Reserve Bank presidents leaked the news of the Fed's policy change in an effort to stall a Fed move toward lower interest rates, according to a report issued yesterday by the Washington consulting firm Johnson Smick International.

According to those with access to the report, Johnson Smick said Fed governors are furious with the news leak to the Wall Street Journal, in which it was reported that the Fed voted at Tuesday's meeting against an immediate rate cut. The Journal also reported that Fed officials agreed to suspend a bias toward lowering rates that had been in effect since August.

The news --ed hopes among bond traders who were betting on a rate cut within the next few weeks.

Fed governors believe the news leak robs Fed Chairman Alan Greenspan of the flexibility to cut the funds rate a quarter of a percentage point without further consultation with the policy-setting Federal Open Market Committee, according to people with access to the report.

Officials at Johnson Smick didn't return repeated calls for comment. Former Fed Vice Chairman Manuel Johnson is a principal in the firm. It is not uncommon for reports by Johnson Smick, which specializes in analysis of the world's central banks, to affect bond and currency markets.

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