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fomc | 2,005 | I hope that is the decision. As for the balance-of-risk assessment, I don't think we need it in the statement. I don't think it serves any purpose. | 33 |
fomc | 2,005 | That is a valid issue to put on the table. President Poole. | 15 |
fomc | 2,005 | It's important, as we've said before, that the minutes be true to the transcript, but it's also important that the statement be true to the whole process. We don't want to say something now that's going to be misleading. I think the minutes need to convey the difficulty that the Committee has had in coming up with alte... | 251 |
fomc | 2,005 | Right, and that we're keeping for the moment what we have there, because to go back to the original is worse. | 24 |
fomc | 2,005 | I think that's the only practical alternative at this point. | 11 |
fomc | 2,005 | To go back to the original is worse. | 9 |
fomc | 2,005 | No, I would just keep it as is. I agree. | 13 |
fomc | 2,005 | I agree with President Poole. | 7 |
fomc | 2,005 | Can we all agree on that particular phraseology? We will try to represent in the minutes the substance of this discussion to telegraph where we are, going forward, including our discussion of all the various alternatives. And we'll leave it for the May meeting to work this out. My recollection is that, when we started ... | 198 |
fomc | 2,005 | I have just a quick suggestion: If we're really going to tackle this in May, we ought to try to get drafts of what we're going to work with out earlier than a couple of days before the meeting so we have more time to share our views. | 51 |
fomc | 2,005 | There's no reason why we can't. | 7 |
fomc | 2,005 | That would be my plea. | 6 |
fomc | 2,005 | Yes, that's easy enough. [Laughter] | 10 |
fomc | 2,005 | Sorry, Vincent. | 4 |
fomc | 2,005 | Finally, I hope, President Minehan. | 9 |
fomc | 2,005 | I just want to be sure I understand what you mean by leaving the statement the way it is. I assume you mean taking the alternative B language and leaving it the way it is. | 37 |
fomc | 2,005 | Correct. | 2 |
fomc | 2,005 | Okay, though I'm not real happy with that. But I get your point that a move of 25 basis points, with an emphasis on inflation pressures that haven't been there in the past and a reference to how difficult the decision was not to take away the "measured" language will prepare everybody for what we might do at the May me... | 146 |
fomc | 2,005 | Well, that's on the table. And I think we should not be fixated on any past structure of the statement. | 24 |
fomc | 2,005 | I also agree with President Guynn that just having the weekend to look this over was not enough time. It was a little like ordering Chinese food--choose two from Column A, two from Column B, and two from Column C. We can't do this with only a day or two to review it. | 61 |
fomc | 2,005 | I think that's a valid request, and I see no reason why we can't separate that from the Bluebook generally, because it really doesn't rest all that much on either the Greenbook material or the rest of the Bluebook. Unless something extraordinary happens in the period from now until late April, it doesn't strike me that... | 97 |
fomc | 2,005 | What do you think we ought to do? [Laughter] | 13 |
fomc | 2,005 | Well, I had an hour and 27 minutes worth of comments prepared, but basically let me just say this: I think the reason we're having these sorts of difficulties is because we're running into what I suspect may well be the tail end of the stimulus that has occurred in the world economy from extraordinary changes in global... | 954 |
fomc | 2,005 | Mr. Chairman, I'm okay with this. I do want to say, though, that your last comment on the loss function is really a major concern of mine. To the extent that we are too slow on moving back into the neutral zone, I think the danger is that later on we will have to go higher faster and the impact on the economy will be m... | 110 |
fomc | 2,005 | I agree with that. Governor Kohn. | 9 |
fomc | 2,005 | Thank you, Mr. Chairman. I agree with your proposal, and I agree with your analysis that the loss function is shifting and that we need to be very careful not to get behind the curve here. I think the proposed language will put people on notice that we understand that that loss function is shifting and that this is whe... | 486 |
fomc | 2,005 | The critical issue is: Do we know something? There's going to come a time when we can't forecast and we have no idea what our next policy move will be. And to be forward-looking in that context is, obviously, inappropriate. | 47 |
fomc | 2,005 | Right. But I think if we said that, that would be useful information. If we said we don't know which way rates are going to go next--that we're not sure and it depends on the information that comes out--that would be useful for the market to know. | 55 |
fomc | 2,005 | Governor Gramlich. | 4 |
fomc | 2,005 | Thank you, Mr. Chairman. First off, I accept your recommendations in total, and I also apologize for making the point I made so late in the game. I wish I had been quicker to see the problem, and I would have said something earlier. But I accept the argument that at this point we probably ought to go with alternative B... | 316 |
fomc | 2,005 | President Moskow. | 4 |
fomc | 2,005 | Just two comments, Mr. Chairman. I agree with your recommendation on the rate increase and on alternative B after this extensive discussion. I found the discussion very helpful and, though it may have been a little long, in my view it was useful to have it. As for forward-looking statements, I personally think that the... | 248 |
fomc | 2,005 | President Poole. | 4 |
fomc | 2,005 | Thank you, Mr. Chairman. I support the 25 basis point increase. I want to emphasize a point that Don Kohn brought up. Since our last meeting, the forward market estimates on the funds rate are up by 25 basis points. If we had perfect control over the term structure of interest rates or all the forward forecasts, in ter... | 342 |
fomc | 2,005 | President Santomero. | 5 |
fomc | 2,005 | Thank you, Mr. Chairman. I can support the proposal to raise the fed funds rate 25 basis points and I can accept the wording in alternative B. I must admit that Governor Gramlich's amendment--or maybe it was Governor Kohn's amendment, I'm not sure which--makes some sense to me because I think that's more descriptive th... | 188 |
fomc | 2,005 | Governor Olson. | 3 |
fomc | 2,005 | Thank you, Mr. Chairman. I also agree with the 1/4 point increase, and I know there's a lot of anticipation looking forward to the May meeting. I look forward to it now with some trepidation. [Laughter] I am fearful that creativity may be epidemic by the time we get there. While I was not here in 1994, I was here in 20... | 172 |
fomc | 2,005 | Vincent Reinhart. | 5 |
fomc | 2,005 | Mr. Chairman, not that I'd like to reopen alternative B, but I was wondering in paragraph 5 whether or not it would be appropriate to refer to "appropriate monetary policy" rather than just "appropriate policy" because it's obvious that not many of you believe that either fiscal or trade policy is likely be appropriate... | 65 |
fomc | 2,005 | Of course, the public wouldn't expect us to be commenting on it, either. | 16 |
fomc | 2,005 | Any objection to putting "monetary" in there to qualify that? Hearing no objection, so ordered. Governor Bies. | 26 |
fomc | 2,005 | Thank you, Mr. Chairman. I support both the 25 basis points and alternative B, as amended. In terms of the dialogue we've just had about how we communicate, while it's very painful every time we go through one of these exercises, I believe this is one of the things that we need to think through because the transparency... | 312 |
fomc | 2,005 | President Stern. | 3 |
fomc | 2,005 | I, too, favor the 25 basis point increase, and I'm comfortable with the language of alternative B. Looking forward, I do think we have an obligation to communicate clearly about policy prospects, to the extent that we can. And if this involves from time to time sharing our uncertainty with market participants, then so ... | 66 |
fomc | 2,005 | Governor Ferguson. | 3 |
fomc | 2,005 | Thank you, Mr. Chairman. I support your recommendation of 25 basis points and I support alternative B. On the broad issues, I think we have to continue to attempt to have in our statement some forward-looking language, as painful as it may be. I did not support the move toward having the minutes come out earlier as a t... | 337 |
fomc | 2,005 | President Guynn. | 4 |
fomc | 2,005 | Mr. Chairman, we've obviously begun an important conversation. If it wasn't evident before, it is now, how painful and difficult this is going to be. I also appreciate the reminder of the need to be sure that we don't unnecessarily shock the markets as we try to get our words right--or as right as we can make them. So ... | 89 |
fomc | 2,005 | President Pianalto. | 4 |
fomc | 2,005 | I also support the recommendation for a 25 basis point increase in the funds rate. I was concerned, when I first read on Friday the language in paragraph 5 in alternative B, that it would be confusing. The discussion today helped me to understand the meaning behind the language, and I hope that we'll be able, through o... | 200 |
fomc | 2,005 | Governor Bernanke. | 4 |
fomc | 2,005 | Thank you, Mr. Chairman. I support the recommendation. I think the addition of the phrase "appropriate policy action" is actually useful, because it will emphasize that our forecast is conditional on continued tightening rather than being an unconditional forecast. I agree with Governor Kohn and Governor Ferguson, amon... | 184 |
fomc | 2,005 | President Lacker. | 4 |
fomc | 2,005 | I, too, support your policy recommendation, Mr. Chairman, and I can support the language in alternative B for now. Also, I didn't realize I was under an obligation to communicate about the language before the meeting, and I apologize for confusing the meeting in that regard. I don't think that we ought to pull informat... | 293 |
fomc | 2,005 | President Yellen. | 4 |
fomc | 2,005 | Thank you, Mr. Chairman. I support your recommendation to raise the federal funds rate 25 basis points. I can also support alternative B, although I have significant discomfort with the balance-of-risk statement in line 5. I agree with President Lacker's comment that it has now been made essentially meaningless and can... | 278 |
fomc | 2,005 | Vice Chair. | 3 |
fomc | 2,005 | I support your recommendation to move 25 basis points, and I support alternative B as described here. Actually, I think it's a pretty good statement, considering the alternatives. [Laughter] It does two important things in that it conveys an evolution in our signal in two respects. It acknowledges the change in the out... | 347 |
fomc | 2,005 | We do have an inherent contradiction in having the minutes discuss how the minutes are going to be phrased! [Laughter] President Minehan. | 29 |
fomc | 2,005 | Presumably, we'd not address that too much in the minutes; we can leave it to the transcript that will be released five years from now. I'm in agreement with the 25 basis points. As I said before, I can go along with keeping alternative B the way it is. I have some concerns about it, and I'm not alone, but I think we'v... | 587 |
fomc | 2,005 | Thank you. Helen, did you want to say anything? | 12 |
fomc | 2,005 | Sure. I do support your 25 basis point recommendation and your proposed language. The need for a more flexible directive has been discussed at each of the four meetings I've attended, so I'm looking forward to seeing how you resolve it in May and whether or not I can understand what you did when I read it. [Laughter] | 66 |
fomc | 2,005 | You've had the final word. | 6 |
fomc | 2,005 | I'm reading from page 25 of the Bluebook. The wording would be: "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee in the immediate future seeks conditions in reserve mark... | 164 |
fomc | 2,005 | Call the roll. | 4 |
fomc | 2,005 | Chairman Greenspan Yes Vice Chairman Geithner Yes Governor Bernanke Yes Governor Bies Yes Governor Ferguson Yes Governor Gramlich Yes President Guynn Yes Governor Kohn Yes President Moskow Yes Governor Olson Yes President Santomero Yes President Stern Yes | 49 |
fomc | 2,005 | The Federal Open Market Committee will be in recess until the Board of Governors meets and returns with its response to discount rate requests. [Recess] | 29 |
fomc | 2,005 | By unanimous vote, the Federal Reserve Board accepted all requests for discount rate changes. | 16 |
fomc | 2,005 | All requests for changes of 25 basis points. | 10 |
fomc | 2,005 | Yes, I'm terribly sorry. The Board approved all requests for changes of 25 basis points. There was a maverick there. The last agenda item is to confirm that our next meeting is scheduled for May 3. More importantly, I will confirm that lunch is being served. . | 58 |
fomc | 2,005 | Good morning, everyone. I'd like to welcome Richard Fisher. | 12 |
fomc | 2,005 | Thank you, Mr. Chairman. | 7 |
fomc | 2,005 | Your colleague, Helen Holcomb, did an exceptionally good job here, and I wish you'd convey that to her. Even though we've done that before, third parties sound so much more credible. | 38 |
fomc | 2,005 | I will do that, Mr. Chairman. | 9 |
fomc | 2,005 | As you know, Governor Bernanke is not attending our meeting today. He has recused himself for reasons that are obvious. We wish him well, and I think he is on his way to being a colleague of a different sort. We are going to miss him. Let's get started with Dino Kos. | 61 |
fomc | 2,005 | 1 Thank you, Mr. Chairman. The intermeeting period began with worries about building inflationary pressures but ended with a growth scare, as incoming data were weaker than expected and Street economists fell over themselves to cut their GDP forecasts for the first half of 2005. Meanwhile, the inflation concerns remain... | 1,912 |
fomc | 2,005 | It's sort of sad to look at the composition of the Lehman Brothers high-yield index. I'm looking at some of the names in the context of 30 years ago--General Motors, AT&T, and Georgia Pacific. The world is telling us that there is creative destruction out there. To what extent do the GM, Ford, and collateral issues, as... | 172 |
fomc | 2,005 | Well, they will be affected in the short run, as investment managers reprice the GM and Ford paper. | 22 |
fomc | 2,005 | I'm thinking more in terms of the effect on the averages of these indexes. | 15 |
fomc | 2,005 | Oh, I see. I'm sure that there would be an effect, but I haven't looked at this. As that paper was taken out, I guess it would tend to reduce the posted spreads. We did see that in the emerging-market indexes, as some countries defaulted and were taken out of the indexes. | 62 |
fomc | 2,005 | When Argentina came out, it was a huge effect. | 11 |
fomc | 2,005 | Exactly. So, I would think that one would see the same kind of effect on the index itself, but I haven't looked at the specific question to check it out. MR. REINHART It's a question we can answer, Mr. Chairman. The thing I would note is that GM is a smaller component of the BBB index than it would be of the high-yield... | 111 |
fomc | 2,005 | Mr. Chairman, just one follow-up. The staff's constructed BBB index already downweights outliers to try to get a more accurate, smoother index. | 31 |
fomc | 2,005 | The very process itself would produce an effect. As soon as these issues begin to move off what would be a sort of constant BBB yield, it automatically drops out-- | 33 |
fomc | 2,005 | Not entirely, but it gets downweighted by a significant amount. | 13 |
fomc | 2,005 | You're weighting with respect to the position on the spread? | 11 |
fomc | 2,005 | Yes. | 2 |
fomc | 2,005 | As the paper moves from BBB to BB, for example, the weights fall and then they rise again as they cross the border? | 26 |
fomc | 2,005 | Yes, exactly. | 4 |
fomc | 2,005 | That's really quite interesting. I didn't know we did it that way. Other questions for Dino? If not, would someone move to ratify the domestic operations? | 32 |
fomc | 2,005 | So moved. | 3 |
fomc | 2,005 | Without objection, they are approved. You wanted to discuss the swaps issue next? MR. KOS Yes, my favorite issue. | 26 |
fomc | 2,005 | I didn't want to ask for a quick, routine vote without allowing time for at least a defensive comment. | 21 |
fomc | 2,005 | It's May, which means that it's the time of year that I come to this Committee and ask for a vote on the renewal of the swap facilities for Mexico and Canada. They get renewed in December, but six months' notice would need to be given if the Committee chose not to renew them. That's why we vote on it at this meeting. | 69 |
fomc | 2,005 | The arguments in favor remain as valid as they have been. [Laughter] | 16 |
fomc | 2,005 | Is that defensive or offensive? | 6 |
fomc | 2,005 | I refuse to comment further. [Laughter] Would somebody like to move to renew these? | 19 |
fomc | 2,005 | So moved. | 3 |
fomc | 2,005 | Without objection. You have another year of grace. Let's move on to Dave Stockton. | 17 |
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