Y2K Concerns Prompted November Vote for Rate Hike

The Federal Reserve’s policymaking committee was unanimous in its decision to bump up interest rates at its November meeting to keep inflation from becoming a problem and expressed a desire to act well before the year 2000 computer date change.

The Federal Open Market Committee, which includes Federal Reserve Chairman Alan Greenspan, voted 10 to 0 to boost the federal funds rate--the interest that banks charge each other on overnight loans--by a quarter of a point to 5.5%, according to minutes of the Nov. 16 meeting released Thursday.

It marked the third time this year that the central bank boosted rates to slow the red-hot economy.

All members “agreed on the need for a slight tightening at this meeting to raise the odds on containing inflation and forestalling the inflationary imbalances that would undercut the very favorable performance of the economy,” the minutes said.

The members also said that concerns about the Y2K changeover were a factor in their decision to boost rates in November.

The decision to raise rates “was reinforced by the prospect that the committee might not find it desirable to adjust policy at its December meeting when a tightening action could add to the potential financial uncertainties and unsettlement surrounding the century date change,” the members said.