Fed says Y2K no impact on policy

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Bloomberg News Sep 2 1999 12:37PM ET Fed's Parry Says Y2K Won't Deter `Appropriate Action'

Phoenix, Arizona, Sept. 2 (Bloomberg) -- Concerns about computers being unable to cope with the date change to the year 2000 won't deter Federal Reserve policy-makers from taking ``appropriate action'' on U.S. interest rates, said Robert Parry, president of the Federal Reserve Bank of San Francisco.

``The Fed certainly is going to do what it considers to be the appropriate action to take with regard to monetary policy and Y2K is not likely to have any influence over that,'' he told reporters following a speech to the Phoenix Community Alliance on the Y2K problem.

Most U.S. businesses and government agencies are taking steps to avoid Y2K problems, he said in his remarks, echoing comments he made in July. He also said spending by companies to address Y2K concerns would add perhaps 0.3 percent or 0.4 percent to U.S. economic growth in the later part of this year and subtract some from growth in early 2000.

``I don't look for it to be a major impact on the pattern of growth of this country,'' he said.

Parry declined to answer other questions about the U.S. economy or Fed interest-rate policy. He is a non-voting member of the Federal Reserve's policy-making Open Market Committee this year. He does participate in policy discussions, though, and will become a voting member in 2000.

Financial Systems

A group of U.S. financial services companies and phone carriers recently tested their systems for transferring financial data and found no problems linked to the date change to the year 2000, Parry said. Computer systems at the U.S. Treasury and Social Security offices also ``seem to be in good shape, although some testing with the Fed remains to be done,'' he said.

``People at the Fed and elsewhere are making good progress -- in many cases, excellent progress -- not only in resolving the Y2K problem, but also in preparing to deal with any disruptions that may occur,'' he said. ``I'd say we're a lot closer to `mission: accomplished' than to `mission: impossible.' ''

The so-called Y2K problem refers to the possibility that older computers programmed to recognize only the last two digits of each year won't function properly when the date changes from 1999 to 2000 on Jan. 1.

All of the computer systems -- from check clearing to settlement of securities transactions -- that are needed for key Fed operations will work normally after the date change, said Parry.

In addition, 99 percent of federally insured banks, savings and loans, and other financial institutions have received the highest possible rating for Y2K readiness, he said.

And a test of national and international payment systems in June showed ``a high level of readiness from more than 500 financial market participants in 19 countries,'' Parry said.

-- Lurker (eye@spy.net), September 02, 1999


See? Everything is wonderful. Nothing to worry about. Now go back to sleep.

-- Prometheus (fire@for.man), September 02, 1999.

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