'Distressed' by leaks, Fed cancels press interviews Rates story cited unidentified source; Central bank


WASHINGTON -- Federal Reserve Vice Chairman Alice M. Rivlin said yesterday that agency officials are "distressed" by recent press leaks on Fed policy, and Fed Governor Janet Yellen has canceled all interviews with the news media at least through the end of this year.

Treasury bonds tumbled Tuesday after the Reuters news service reported that eight of the 12 regional Federal Reserve banks had asked for an increase in U.S. interest rates and that there is a "consensus emerging" at the Fed for a quarter-point increase in the overnight bank lending rate.

The Reuters story cited an unidentified Fed source.

But sources told Bloomberg Business News that most of those regional Fed bank requests were made before the government reported last Friday that inflation was lower than anticipated in August and retail sales for the month fell below expectations.

That led some analysts to say they doubted the story's basic premise.

Even so, the Reuters report followed earlier stories from Bloomberg and the Wall Street Journal, citing Fed insiders, that officials at the central bank are seeking rate increases.

"The Fed is distressed by any kind of leak; that's about all we can say," Rivlin said, when asked about the Reuters story after a meeting yesterday of the Institute of International Bankers in New York.

The Washington Post, without citing a source, reported yesterday that Fed officials were "astonished" at the unusually detailed Reuters report, and raised the possibility that Fed Chairman Alan Greenspan might seek an investigation of the leak.

Rivlin refused to comment on an investigation, as did Fed spokesman Joseph Coyne, and both declined to confirm or deny the Reuters report.

No reason was given for Yellen's decision, announced by her office yesterday, to suspend press interviews.

'There's no policy directive'

Coyne denied any suggestion that Fed officials are being asked to keep quiet. "There's no policy directive," he said.

Yellen isn't the only Fed governor not talking to reporters. Edward Kelley Jr. stopped giving interviews in August, his office said. Rivlin has given no one-on-one interviews since joining the Fed in June, but her office said she hopes to grant some in the near future.

Chairman Greenspan refuses individual on-the-record interviews as a matter of policy.

Governors Laurence Meyer, Susan Phillips and Lawrence Lindsey are still doing interviews, according to their offices, although all are observing the traditional "blackout" period immediately before and after meetings of the rate-setting Federal Open Markets Committee. The FOMC next meets Tuesday.

Comments by FOMC members -- and those attributed to Fed insiders -- have roiled financial markets in recent days.

Last week, Yellen sent bond prices tumbling when during an interview she repeated a statement from a speech she'd delivered days earlier, saying the economy is in an "inflationary danger zone." She later said investors might have overreacted.

Bonds rallied later in the week after government reports showed prices at the wholesale and consumer levels increased only slightly in August, and retail sales barely budged in the month.

The rally reversed again after Tuesday's Reuters report, with the benchmark 30-year Treasury bond falling and pushing its yield up 8 basis points to 7.02 percent in the biggest decline since Aug. 30.

Bonds ended trading yesterday at 7.01 percent.

Pub Date: 9/19/96

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