Real business fixed investment surged at an annual rate of almost 24 percent in the first quarter of the year, rebounding sharply from its lull at the end of 1999, when firms apparently postponed some projects because of the century date change
. In recent months, the trends in new orders and shipments of nondefense capital goods suggest that demand has remained solid.
An important innovation that altered the institutional framework within which open market operations were conducted was made on July 20, when the Federal Reserve Board voted to establish a Century Date Change
Special Liquidity Facility (SLF) for lending to depository institutions from October 1, 1999, through April 7, 2000.
Non-M2 components again exhibited double-digit growth, with some of the strength attributable to long-term trends and some to precautionary buildups of liquidity in advance of the century date change
. One important trend is the shift by nonfinancial businesses from direct holdings of money market instruments to indirect holdings through institution-only money funds; such shifts boost M3 at the same time they enhance liquidity for businesses.
As the year's end approached, uncertainties associated with the century date change
did not create any visible distress in the foreign exchange market.
The prospects for business inventories over coming months were difficult to evaluate, with the usual uncertainties accentuated by century date change
addresses the agencies' supervisory approach to possible temporary balance sheet growth due to potential unusual market responses around the century date change
Between now and the century date change
, we will test and continue to refine these plans as necessary to optimize operational effectiveness at the century rollover.
The information in the reports is not a certification of the readiness of the service provider, and it is still incumbent on each bank to work closely with its service providers to prepare for the century date change
. Service providers and software vendors serving the banking industry are keenly aware of the industry's reliance on their products and services, and most consider their Year 2000 readiness to be their highest priority in order for them to remain competitive in an aggressive industry.
For example, market participants may seek to minimize the number of transactions that would be scheduled for settlement on January 3 or January 4 or that would require open positions to be maintained over the century date change
We are also updating proven plans and techniques used during other times of operational stress in order to be prepared to address potential century date change
Some of these participants indicated that they were currently faced with many competing priorities, including dealing with mergers and acquisitions, addressing the operational issues raised by the federal government's electronic payments initiative, and ensuring that they were compliant with the century date change
While there are challenges before us, I can report that we expect to be fully prepared for the century date change