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fomc | 2,006 | Vice Chair, would you move to ratify? | 10 |
fomc | 2,006 | So moved. | 3 |
fomc | 2,006 | Thank you. Would you like to make an economic presentation, Dave? | 14 |
fomc | 2,006 | 2 Thank you, Mr. Chairman. A few years back, I noted that my briefings could largely be characterized as a collection of confessions and excuses. This morning I would like to add a new element to that list: denial. As you know, the BEA's advance estimate for the growth in real GDP in the fourth quarter--shown in the to... | 2,032 |
fomc | 2,006 | Your next two exhibits detail the supply-side assumptions of the staff forecast, starting with the projection of structural labor productivity. In our analysis, structural labor productivity growth is defined as the increment to labor productivity that can be sustained over time. It is a medium- to long-run concept tha... | 1,489 |
fomc | 2,006 | Your first international exhibit focuses on the dollar. As indicated by the red line in the top-left panel, despite widening U.S. external imbalances, the dollar rose strongly against the major currencies through much of 2005. As seen on the top right, against the euro and the yen, the dollar has recorded net gains of ... | 2,366 |
fomc | 2,006 | The final exhibit presents your economic projections for 2006 and 2007. The central tendencies of those projections anticipate real GDP to increase about 31/2 percent this year and then to run between 3 and 31/2 percent in 2007. Forecasts of core PCE price inflation are centered on 2 percent this year and between 13/4 ... | 140 |
fomc | 2,006 | In exhibit 6, the average workweek is something of a puzzlement. I'm curious to get a sense of what is our now retrospective explanation of the sharp fall in the year 2000-01 and the failure to start back up as the economy picked up. Are we looking at an age or a demographic mix? | 65 |
fomc | 2,006 | Well, the 2001 effect was the incorporation of the NAICS classifications into the payroll survey. So it was just a methodological change that was realized. | 31 |
fomc | 2,006 | So, really, we never had such a drop. The series is just discontinuous. | 18 |
fomc | 2,006 | It's discontinuous. If you look at the two slopes, they're about the same before and after, but there is discontinuity in 2001. | 30 |
fomc | 2,006 | We know labor force participation changes as people move into different age brackets. So if we have data of average hours by age, do we have any judgment as to whether their average workweek hours change as well? | 42 |
fomc | 2,006 | Not to my knowledge. | 5 |
fomc | 2,006 | I don't know either, Mr. Chairman. I would suspect, though I don't really know, that workweeks would tend to decline later in an individual's life cycle, certainly relative to the prime age working years. | 42 |
fomc | 2,006 | Individuals also may be more affluent so that they have an ability to actually-- | 15 |
fomc | 2,006 | Or affluent and more likely to be taking on part-time work in retirement. [Laughter] I'm not suggesting that your workweek is likely to fall; I'm sure it's going to maintain its current level! [Laughter] | 45 |
fomc | 2,006 | I object to that! [Laughter] I mean, there are data by age. Certainly in the household survey we pick up something. | 28 |
fomc | 2,006 | Yes. | 2 |
fomc | 2,006 | I'm just curious. President Santomero. | 9 |
fomc | 2,006 | I wanted to go to the housing issue. In the projection in the Greenbook, as I understand it, you've got housing prices going up at about a 51/2 percent rate as compared with last year's number, which I think is 12 percent. We've been looking at the sensitivity of what happens to our GDP growth rate in '06 and '07 to th... | 138 |
fomc | 2,006 | That sounds like a reasonable sensitivity. As you know, we have presented this effect in the past. It's a little larger than the effects that we get when we run our model, which would be measured more around 1/4 percentage point to 1/2 percentage point. Now, you may recall that last June John Williams presented some si... | 406 |
fomc | 2,006 | Thank you. | 3 |
fomc | 2,006 | Vice Chair. | 3 |
fomc | 2,006 | Nathan, if you look at the differences between the Greenbook forecast of the path of the external balance and those of other forecasters, can you summarize for us what the major sources of differences are? Are they about the exchange rate assumption, or are they about something else? | 55 |
fomc | 2,006 | I think the source varies from forecast to forecast. One difference across these forecasts relative to ours is in the oil price. The other forecasters are in the $50-$55 range, whereas we have an oil price of $65 to $70. So that's a piece of it. Looking at the assumptions embedded in these forecasts pretty carefully, t... | 180 |
fomc | 2,006 | Any further questions for our colleagues? If not, before we go to the general discussion, because of the unusual nature of this particular one-day session with various timing problems, I just calculated that, in the eighteen years I've been here, we've gone from an average presentation of three minutes to one of six mi... | 158 |
fomc | 2,006 | With restraint, Mr. Chairman, most of our contacts this round were positive about current business conditions. However, they were cautious about the prospects for '06, largely because they didn't see any obvious drivers for growth. With regard to current conditions, national labor markets appear to be solid. Both of th... | 990 |
fomc | 2,006 | Thank you. President Yellen. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. Recent data on economic activity, as summarized by the fourth-quarter GDP figure, have been surprisingly weak. But there are good reasons to believe that much of the softness will prove temporary, so I tend to agree with the Greenbook and other forecasts in expecting a rather sharp rebound in t... | 1,003 |
fomc | 2,006 | Thank you. President Santomero. | 8 |
fomc | 2,006 | Thank you, Mr. Chairman. Consistent with the national economy, overall activity in the Third District slowed somewhat more than expected in the fourth quarter. Despite this slowing, the general view in my District is that our regional economy is likely to expand at a moderate pace in 2006. Payroll employment continues ... | 1,172 |
fomc | 2,006 | I should point out that a luncheon in the President's honor is planned at the March meeting. And I guess you and I will be looking from the sidelines, but neither one of us will know what happened at that March meeting until we get to it. [Laughter] Thank you for your nice remarks. President Minehan. | 66 |
fomc | 2,006 | Thank you, Mr. Chairman. There's not a lot new in New England. So I thought I'd just skip over my usual probably more-lengthy-than-necessary comments on the region. Let me just mention a couple of things, though. Employment growth is still slower, and income growth is still slower than that of the nation. Our regional ... | 1,120 |
fomc | 2,006 | President Fisher. | 3 |
fomc | 2,006 | Mr. Chairman, I took note of the two Davids' forecast of 4.7 percent growth in the first quarter. Especially against President Yellen's comments, it brought to mind the name of one of Henry Jerome's albums on the Decca label called "Brazen Brass." That is, some might consider brazen or even brassy that it jibes or, in ... | 1,083 |
fomc | 2,006 | Thank you very much. And the last time I spoke to Henry V [laughter] I got a view of his notions of strategy. President Lacker. | 32 |
fomc | 2,006 | Thank you, Mr. Chairman. Fifth District economic activity continued to advance broadly in December and January. Service-sector employment and revenue strengthened, and retailers reported generally strong sales and a pickup in hiring. In manufacturing, the signals are mixed. Shipments flattened out in December and turne... | 759 |
fomc | 2,006 | Thank you very much. President Pianalto. | 9 |
fomc | 2,006 | Thank you, Mr. Chairman. By now I'm sure that most of you are tired of hearing me report that conditions in my District are not as vigorous as conditions in most of the country. I know that I'm tired of repeating it. Fortunately, optimism is increasing in many parts of my District. My directors and business contacts th... | 539 |
fomc | 2,006 | President Guynn. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. I also have not had the occasion in the public farewell ceremonies to say thank you to you. So let me say what an honor it has been to serve under your leadership and to be associated with the great confidence and respect you've given people in what we do at the Fed. Thank you. Thank you very m... | 1,275 |
fomc | 2,006 | President Hoenig. | 4 |
fomc | 2,006 | Mr. Chairman, in thinking about the status of the U.S. economy and the appropriate funds rate target at this meeting, I would start by suggesting that, in my judgment at least, the current funds rate is probably within the neutral range. Therefore, we should be mindful of not going too far, especially when it would app... | 899 |
fomc | 2,006 | Let's break for coffee. Since our time is really quite restricted, I would request that we come back in seven minutes. [Laughter] | 28 |
fomc | 2,006 | David Stockton. | 3 |
fomc | 2,006 | Mr. Chairman, I quickly consulted with my labor economist experts at the coffee break about your question about the demographic effects on the workweek, and, indeed, there is--and it's incorporated in our forecast--a modest effect of the aging of the workforce on the workweek, with older workers having shorter workweek... | 107 |
fomc | 2,006 | Thank you. President Poole. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. What strikes me from my conversations with my contacts is the growing confidence that they do not see major risks on either side, that there are reduced standard errors around their projections. Very few had comments or concerns about inflation outside of energy, which, of course, is on everybo... | 810 |
fomc | 2,006 | "How to Be a Joyous Central Banker, Even Though We Don't Have Hearts." [Laughter] Can we end the speculation on the title? [Laughter] Thanks very much, Bill. President Stern. | 43 |
fomc | 2,006 | Thank you, Mr. Chairman. Let me start with one anecdote about housing activity in the District. I don't know how representative this is nationwide, obviously, but there are signs of slowing in both housing construction and, more dramatically, in sales recently. And this winter in the Twin Cities, several hundred unioni... | 656 |
fomc | 2,006 | Vice Chair. | 3 |
fomc | 2,006 | Mr. Chairman, in the interest of crispness, I've removed a substantial tribute from my remarks. [Laughter] | 24 |
fomc | 2,006 | I am most appreciative. [Laughter] | 9 |
fomc | 2,006 | I'd like the record to show that I think you're pretty terrific, too. [Laughter] And thinking in terms of probabilities, I think the risk that we decide in the future that you're even better than we think is higher than the alternative. [Laughter] With that, the economy looks pretty good to us, perhaps a bit better tha... | 804 |
fomc | 2,006 | Governor Olson. | 3 |
fomc | 2,006 | Thank you, Mr. Chairman. The surprise of the fourth-quarter GDP number and the slightly elevated inflationary pressure have caused us to take, I think, a closer look at the underlying strength of the economy. And to an extent it is reassuring--certainly, the strength in industrial production and real personal consumpti... | 388 |
fomc | 2,006 | Thank you very much, Governor. Governor Ferguson. | 10 |
fomc | 2,006 | Thank you, Mr. Chairman. The Greenbook baseline presents a relatively positive scenario. But as the 90 percent confidence interval given in the Greenbook clearly indicates, there is considerable uncertainty around this baseline. In a theoretical world of certainty equivalence, that range of uncertainty would not matter... | 1,362 |
fomc | 2,006 | Thank you. Governor Kohn. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. The projections I submitted for this meeting reflected expectations of an economy that probably is operating in level terms somewhere in the neighborhood of its long-run, sustainable potential and will continue to do so over the next two years with growth broadly in line with the growth of pote... | 1,003 |
fomc | 2,006 | Governor Bies. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. When I was preparing for this meeting early last week, I was feeling very comfortable with the forecast of good growth in 2006, in the mid-3 percent range near potential, and a modest uptick in core inflation above 2 percent. As many of you have already remarked, the GDP numbers on Friday made ... | 919 |
fomc | 2,006 | Thank you so much. Vincent. | 7 |
fomc | 2,006 | 3 Thank you, Mr. Chairman. I'll be referring to the material that Carol Low handed out during the coffee break. Judging by the information derived from money market futures plotted in the top panels of your first exhibit, this seems likely to be another of those meetings in which the important part of the discussion is... | 1,931 |
fomc | 2,006 | Questions for Vincent? | 4 |
fomc | 2,006 | How do your inflation expectations evolve in your two simulations, and in particular, how are they affected by policy? Is it just through the effect of resource slack on actual inflation? | 35 |
fomc | 2,006 | In these simulations, long-run inflation expectations evolve very gradually based on the path of actual inflation. So what happens is in the 11/2 percent simulation you start off with inflation expectations of 2 percent, and you have to experience inflation below that to work it down. | 55 |
fomc | 2,006 | Thanks. | 2 |
fomc | 2,006 | Anybody else? Do we have copies of the statement? Could you circulate them, please? I will be rather brief for a number of reasons, not the least of which is I mostly agree with what has been said around this table and I just don't want to duplicate it. I do think that this is an extraordinary economy. If you look at t... | 510 |
fomc | 2,006 | Do you want to go around first? | 8 |
fomc | 2,006 | I'm sorry. I'm trying to cut the discussion short. [Laughter] | 15 |
fomc | 2,006 | Do you have someplace to go? [Laughter] | 11 |
fomc | 2,006 | No, but I'm looking at the clock. | 9 |
fomc | 2,006 | The clock, I mean, it has stopped. [Laughter] | 14 |
fomc | 2,006 | Let the record reflect that the Committee has thwarted the attempt by the Chairman to change the process in a way that-- [Laughter] | 28 |
fomc | 2,006 | Actually I thought it was elegantly done. [Laughter] | 12 |
fomc | 2,006 | Mr. Chairman, I, too, think that we should move by 25 today, and I'm comfortable with the language as it's modified here. I do think that it's important to note that the market judges the odds of March as probable. The Greenbook assumption is more consistent with that and, as Janet said, some of the Bluebook filters we... | 353 |
fomc | 2,006 | Governor Kohn. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. I agree on the second point that we should postpone consideration of what we vote on for the reasons that the Vice Chairman just noted. I support the increase in the federal funds rate today. I'm a little concerned, like the Vice Chairman, that this "may" language could cause a bit of a rally i... | 138 |
fomc | 2,006 | President Santomero. | 5 |
fomc | 2,006 | I support the recommendation in terms of the 25 basis points and also the wording. I actually like "may" rather than "may well." I think the data will in all likelihood be a little stronger, which will buy us that "may" to "may well" as time evolves, but not necessarily. I like the ordering as is presented here. So thi... | 170 |
fomc | 2,006 | President Poole. | 4 |
fomc | 2,006 | I support the increase of 25 basis points at this meeting. I would like to add a third question to the two that Vince gave us at the top of exhibit 2. What language creates the best basis for smooth transition of future language? Every time we make a change, it gets parsed, examined, cut, read between the lines, and so... | 130 |
fomc | 2,006 | President Fisher. | 3 |
fomc | 2,006 | Well, I support a 25 basis point move. I think President Poole has made a good point. I wrote a note in support of it, but I can accept the language that's here. Then, finally, I am in full accord with the President of the Reserve Bank of New York's articulation of the issue of procedure, which I think we should defer. | 74 |
fomc | 2,006 | Governor Ferguson. | 3 |
fomc | 2,006 | Thank you, Mr. Chairman. I support your recommendation of 25 basis points. I rather like moving the operative forward-looking language to "may" as opposed to "may well" because I think it frees the markets to look much more at the data, as they would do naturally anyway. I do think it's at least 50-50, as Governor Kohn... | 181 |
fomc | 2,006 | President Hoenig. | 4 |
fomc | 2,006 | Yes, Mr. Chairman, I agree with your proposal. I'm very pleased with taking the word "well" out just because I think the statement should be giving the market 50-50 odds rather than something greater than that as we look forward. And we are data dependent. So I really prefer that. And I agree with postponing the discus... | 96 |
fomc | 2,006 | President Stern. | 3 |
fomc | 2,006 | Thank you, Mr. Chairman. I find myself in agreement with, I guess, everybody who has already spoken. The 1/4 point increase seems appropriate to me. I'm comfortable with the language as proposed, and I think we should defer the discussion of ownership of the statement until March. | 59 |
fomc | 2,006 | President Minehan. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. I, too, am comfortable with your proposal to move 25 basis points today. I am also comfortable with this language. I actually could have gone with an even shorter formulation that was on page 22 of the Bluebook, which basically combined rows four and five and didn't make reference to the need t... | 254 |
fomc | 2,006 | The reason for Monday-Tuesday was that you probably already had travel plans that got you into D.C. on Monday, whereas having to extend to Wednesday might pose more of a hardship. But it was viewed as just for this meeting. | 47 |
fomc | 2,006 | Okay. Thank you. | 5 |
fomc | 2,006 | President Pianalto. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. I, too, support your recommendation on the 25 basis point increase in our fed funds rate target. I, too, like the language as you proposed it. Removing the word "well" in the statement gives us, I think, more of the flexibility that I said I desired. And I, too, would like to defer the decision... | 85 |
fomc | 2,006 | President Guynn. | 4 |
fomc | 2,006 | Mr. Chairman, I support your recommendation. I'm comfortable with the language. Some of the alternative language that has been suggested is attractive. I think we should make as few changes today as we can, and this recommendation does that. I also support the Vice Chairman's recommendation to wait until another day to... | 74 |
fomc | 2,006 | President Yellen. | 4 |
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