What impact did Federal Reserve Board policy have on money market activity during the period?
Federal Reserve Board policy in general had a major impact on the backdrop to money market activity, as did the US economy. During the first half of the fiscal year, the US economy grew slightly on the back of strong consumer demand for houses, housing-related items and automobiles. In September, the Federal Reserve Board left rates unchanged, but it was a decision opposed by two board members. The ongoing threat of war with Iraq, volatility in the stock market, rising oil prices and relatively soft employment numbers all weighed on consumer confidence, which slumped in October to its lowest level since 1993. Business spending showed no convincing signs of a pickup until November, when a rise in durable goods orders signaled a possible turnaround. Consumer confidence rallied despite a poor labor market. Still, following a weak employment report as well as other unfavorable economic reports, the Federal Reserve Board cut the targeted federal funds rate by 50 basis points to 1.25% on Nov
