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fomc | 2,006 | President Yellen. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. May I say it's a great pleasure to see you back at the table. And while I hesitate to wish your predecessor's eighteen years of service on anyone, I look forward to many interesting and productive meetings under your leadership. The latest monthly data show significant strength in activity for ... | 1,424 |
fomc | 2,006 | You address this a bit at the end, but how do you reconcile your optimism about core inflation with the view that you have increasing resource utilization and that it affects inflation? | 34 |
fomc | 2,006 | Okay. I guess my view is that it's a risk, but at the moment, by various measures, we're pretty close to, not beyond, full employment. The unemployment rate has declined unusually rapidly over the last year, but a simple Okun's law calculation--and I think that the staff has commented on this in the past, if I'm not mi... | 274 |
fomc | 2,006 | Thank you. President Guynn. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I share the view of most that the slow growth in the fourth quarter of last year was, in fact, a temporary aberration that will be offset by strong first-quarter growth in the neighborhood of 41/2 to 5 percent. Auto sales have already bounced back, and defense spending is unlikely to continue d... | 1,248 |
fomc | 2,006 | Thank you. President Lacker had a comment. | 10 |
fomc | 2,006 | Yes. I apologize. I haven't learned the gestures yet. [Laughter] I didn't practice them before the meeting. President Yellen, I wanted to ask you two things, and they're related in my mind. What's your understanding of why the pass-through correlations declined in the mid-1980s? And second, if the interpretation has to... | 105 |
fomc | 2,006 | Well, I think the econometric evidence suggests that the pass-through has declined and doesn't speak clearly to the reason for the decline. My guess would be that inflation expectations have become better anchored, and market participants have more confidence in the Fed's commitment to price stability. And so there are... | 148 |
fomc | 2,006 | I agree with everything you've said. That's my hunch about why that pass-through correlation fell as well. But then, in principle, shouldn't an improvement in expectations about policy have the capacity to make that relationship between resource utilization and nominal inflation relatively flat? | 50 |
fomc | 2,006 | It certainly could. | 4 |
fomc | 2,006 | Okay. | 2 |
fomc | 2,006 | That could be one of the drivers. Sure, I agree with that. | 15 |
fomc | 2,006 | President Guynn, I wonder if you would say a little more about the Katrina rebuilding--why you think that's going to be very slow. | 28 |
fomc | 2,006 | Mr. Chairman, the more times we visit there--we're going to take our full board down in May--and the more people we talk to, our sense is how dysfunctional that whole area still is. The state government still hasn't got its act together. You may have read that the mayoral race in New Orleans has twenty-three candidates... | 224 |
fomc | 2,006 | Thank you. President Minehan. | 7 |
fomc | 2,006 | Thank you very much, Mr. Chairman, and welcome back. | 13 |
fomc | 2,006 | Thank you. | 3 |
fomc | 2,006 | I notice that you are without a Hawaiian shirt. [Laughter] | 14 |
fomc | 2,006 | Next meeting. | 3 |
fomc | 2,006 | Next meeting, okay. [Laughter] We've had a wide range of contacts in New England since our last meeting, so what I'm going to do is try to summarize five or six different things that came out as a result of this range of contacts. The first point is basically driven by the data. New England continues to grow more slowl... | 1,462 |
fomc | 2,006 | Thank you. Let me just highlight a theme that President Guynn and President Minehan both mentioned, which is that some of the tightest labor market conditions are for the most skilled workers. It seems to me that normally in a business-cycle expansion the lower-skilled workers tend to benefit at least as much as highly... | 102 |
fomc | 2,006 | I don't think we're misinterpreting it. I think that's what's going on. | 16 |
fomc | 2,006 | President Fisher. | 3 |
fomc | 2,006 | Mr. Chairman, like the others, I am grateful to be here under your chairmanship and also to be with the two new Governors who are on board. I will spare you Texas hyperbole, with the exception of just saying that our District is growing faster than the nation and is pumping on all cylinders. And I'm going to focus my c... | 1,933 |
fomc | 2,006 | Speaking of the largest hole ever dug in history, I wonder if you would have a view on the current account implications of some of this offshoring that you've been talking about. Are you concerned about that? | 42 |
fomc | 2,006 | I am concerned. I worry particularly because I think--and I'd have to get the numbers, but I'm virtually certain--that the shift is taking place particularly in currencies that don't adjust to the dollar. India has just announced that they would open the rupee and open their capital account. The Chinese clearly do not ... | 401 |
fomc | 2,006 | Thank you. We have a timing decision to make. We could take a break now and come back. I'd like to propose that we stay in the meeting until 6:00 and, at that point, go to a reception and dinner. We will probably not finish this round by 6:00, but there will be plenty of time tomorrow to do that and time to reflect. Is... | 107 |
fomc | 2,006 | Thank you, Mr. Chairman. I see little in the latest information on the District economy or data on the national economy that gives me undue concern about prospects for sustained economic growth. Turning first to the District--as is frequently the case, overall it is performing much like the national economy. The expans... | 1,005 |
fomc | 2,006 | Thank you. President Pianalto. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. The momentum in the Fourth District economy appears to be broadly similar to the rest of the country's. The region appears to be expanding at a good but not spectacular pace. Although my District never experienced the extreme acceleration in housing activity seen in many other parts of the coun... | 835 |
fomc | 2,006 | You mentioned nonresidential construction, and President Fisher mentioned that. I think the Greenbook was pretty pessimistic about the near-term prospects for nonresidential construction. Is there some dissonance there? [Laughter] | 45 |
fomc | 2,006 | Well, in fact, we're forecasting a recovery. We've been forecasting a recovery for the last year and a half that hasn't happened yet. I actually don't view us as being terribly pessimistic in that regard. We're forecasting an upturn after a long period of disappointing, sluggish performance on that side. So I guess I'd... | 80 |
fomc | 2,006 | President Minehan. | 4 |
fomc | 2,006 | Do you count state and local construction in that? Does that come in nonresidential or in state and local spending? | 24 |
fomc | 2,006 | That's actually in state and local construction spending. It's a different component. | 14 |
fomc | 2,006 | Because that, I would think, has the potential to be pretty strong, given the tax collections and so forth. | 23 |
fomc | 2,006 | Actually, it has been an area that has improved as well. So the one part in which we haven't seen much yet has been the office building side. And that is an area where our forecasting improved, so I was actually a bit relieved to hear of some cranes out there. [Laughter] | 60 |
fomc | 2,006 | President Pianalto. | 4 |
fomc | 2,006 | I was just going to add to that, David. For so many months I was hearing about some increased construction in health care facilities and school buildings. But in the past few months it has been broader than that--it has been office buildings and some plants. | 52 |
fomc | 2,006 | President Fisher. | 3 |
fomc | 2,006 | Mr. Chairman, in terms of what we see outside our window at our Federal Reserve Bank, it is almost all condominium construction. The joke is that you want to be the fourth owner of the building that is being constructed. | 45 |
fomc | 2,006 | President Hoenig. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. A couple of things, first, on the region. Like the nation, our region continues to grow at a fairly robust pace. But one of the questions we kept asking in our discussions was whether it was strong but leveling out, or accelerating. I think, for the most part, the consensus is that it's strong ... | 752 |
fomc | 2,006 | Thank you. A number of people have talked about tightening monetary conditions. President Yellen did. Of course, long-term rates have not risen, so I guess there is a question here about the issue of how much is the term premium, how much is the change in the equilibrium rate. I just put that question on the table beca... | 88 |
fomc | 2,006 | Thank you, Mr. Chairman, and welcome back. And welcome to the new Governors. First, I'd like to make a couple of comments on the region before I talk about the national economy. The Third District didn't see a fourth quarter as weak as the national economy, nor is our first quarter as strong. But we're seeing solid gro... | 1,016 |
fomc | 2,006 | Thank you. President Lacker. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. While we had some softer readings on our District's economic performance early in the year, recent measures have been noticeably stronger. Our survey results from March have come in since the Beige Book, and they show continued strength in service-sector revenue growth, along with a sharp rebou... | 1,043 |
fomc | 2,006 | And yet our behavior has to be consistent with the model, right? We have to respond in a way that does, in fact, react to inflationary pressures. | 33 |
fomc | 2,006 | That's right. It's just that I'm always struck in episodes like this at the difficulty of taking advantage of historical correlations without taking a strong stand on how the public expects us to conduct policy. | 37 |
fomc | 2,006 | I'll agree. Vice Chairman Geithner. | 9 |
fomc | 2,006 | Thank you, Mr. Chairman. Like all of you, we think the underlying trajectory of demand and inflation seems quite favorable, perhaps a bit more so than it did in January. We expect real GDP to grow at a rate slightly above the rate of increasing potential in '06 and to slow to the range of potential in '07. We expect th... | 1,403 |
fomc | 2,006 | Anything to report on co-op prices in Manhattan? [Laughter] | 14 |
fomc | 2,006 | As in many cases, I am not sure what you can take from the anecdote, but I guess some people say that you see a little of the froth dissipating. But I don't think the adjustment is acute. If you see hiring at the New York Fed go up substantially in the market, that will be a good leading indicator of housing prices rev... | 78 |
fomc | 2,006 | Thank you. Governor Bies. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. Overall, I agree with many of you around the table and with the Greenbook. I see that you have solid growth going forward. I want first to talk about the corporate sector and then to talk a bit about the household sector. I have talked with several corporate CFOs in the past couple of weeks, an... | 1,300 |
fomc | 2,006 | Do you relate the corporate preference for cash to caution, to risk aversion, and what implications would that have for capital investment? | 26 |
fomc | 2,006 | I would say that, until about six months ago, most of it was risk aversion. Corporations were not sure what their plans were going to be. They did not know how they were going to get earnings growth, and so I think some was a precautionary kind of savings. They clearly deploy most of it into restructuring their balance... | 229 |
fomc | 2,006 | Thank you. Governor Kohn. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. Since the last meeting, as many of us have remarked, we have seen stronger domestic demand and a little less core inflation than expected. To a degree, this extends a pattern. In looking at the Greenbook chart on the evolution of the staff forecast, I was struck by the steady upward drift since... | 1,203 |
fomc | 2,006 | Thank you, Governor Kohn. With apologies to those who have not had a chance to speak, I think we could adjourn now. Let me just remind you that it is especially important, given that this is a meeting in some sense still in progress, that we maintain full confidentiality about the discussions we're having in this room.... | 93 |
fomc | 2,006 | The meeting is reconvened. We want to complete our go-round. President Poole, are you ready? | 23 |
fomc | 2,006 | Okay. Mr. Chairman, it is a great delight to see a 200 percent increase in the number of beards around this table. [Laughter] Half of that was in my point forecast, and the other half was not. [Laughter] The contacts that I've talked to recently are very optimistic about activity--with one exception, which I'll start w... | 699 |
fomc | 2,006 | Same thing. [Laughter] | 7 |
fomc | 2,006 | Well, Washington University has $200 million worth of projects. Reconstruction of Interstate 64 through the city is $500 million. A cement plant, $800 million, is being built south of St. Louis. There are hospital projects that add up to about $525 million, waste water treatment plants, $165 million, and a whole slew o... | 565 |
fomc | 2,006 | The comment and suggestion on nonresidential construction is very helpful, very interesting. On the Wal-Mart wage increases of 1 percent--hasn't Wal-Mart increased health coverage and compensation overall? | 38 |
fomc | 2,006 | Yes, this is the straight hourly wage. They do have some benefit cost increases. I think that, in their budget, they are expecting 7.8 percent over the course of this year. They have been changing the structure of their benefit programs. And the other thing that my contact there said, although I didn't talk to him abou... | 235 |
fomc | 2,006 | Thank you. Governor Olson. | 6 |
fomc | 2,006 | Thank you, Mr. Chairman. In preparation for today's meeting, I talked with the CEOs of three banks--one major money center, one major East Coast regional bank, and one major West Coast--that pretty well have the markets covered. There have been times when those conversations have either been directionally or substantiv... | 774 |
fomc | 2,006 | Did the banks comment on the yield curve; is it affecting them? | 14 |
fomc | 2,006 | We did not hear much comment. I expected to hear much on the yield curve, but I did not have any specific comments. | 26 |
fomc | 2,006 | Thank you. Governor Warsh. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman, and thank you to everyone around the table. I think Governor Kroszner and I share the view that people have been incredibly kind and supportive in teaching us the ways of this institution in the past weeks. So we certainly appreciate that. I know I do. The only advice that I was given last nigh... | 2,272 |
fomc | 2,006 | Thank you. Governor Kroszner. | 9 |
fomc | 2,006 | I received the same advice that Kevin did. [Singing] "To dream the impossible--" [Laughter] | 24 |
fomc | 2,006 | Any two-handed interventions? [Laughter] | 9 |
fomc | 2,006 | Obviously, from the remarks that we heard earlier today and yesterday, there is an enormous amount of strength and resiliency in the economy. Clearly, the economy has rebounded from a temporary slowdown in the fourth quarter. The specifics that I have heard from each of the Districts confirm the broad Greenbook view th... | 1,517 |
fomc | 2,006 | Thank you. I would like now to summarize these views and add a few comments of my own. At that point, if there are additional comments or questions, they will be welcome. We have had, I think, a fairly upbeat group here the last couple of days, which is of course good, both in terms of views of economic activity and in... | 1,965 |
fomc | 2,006 | 2 Carol Low will be handing out some material. Market participants expect you to take another 1/4 point step today along the journey started in June 2004. As can be seen in the top left panel of exhibit 1, the current March and April fed funds futures contracts, plotted as the first two observations along the black lin... | 1,882 |
fomc | 2,006 | Thank you. Are there questions for Vincent? | 9 |
fomc | 2,006 | I have a small question. Vince, in your scatter diagram, you seem to be inferring--at least the way I heard you say it--that, based on the last couple of years, people are looking more to what we say than what we do. What we say has been a lot of the action over the last couple of years. Do we really have enough data t... | 104 |
fomc | 2,006 | You are right--there are not a lot of dots in that bottom right scatter plot. | 18 |
fomc | 2,006 | And we pretty much have told them for three years to listen to what we say. | 17 |
fomc | 2,006 | We did include a box in the Bluebook that showed a more systematic look at the response to data and that was not looking just at the payroll employment surprise. It was looking at eleven different surprises. And it was the case that the response, no matter--Governor Kohn is grimacing, but that's okay. [Laughter] | 67 |
fomc | 2,006 | One of his favorite charts, I think. | 9 |
fomc | 2,006 | I can tell. | 4 |
fomc | 2,006 | My favorite facial expression. | 5 |
fomc | 2,006 | It's toward the back if you want to refer to it. But the point is, the response has moved down. What is actually interesting is that, if you split these data observations into real side and inflation, the response to inflation data has come down the most, consistent with the view that they think that the Federal Reserv... | 76 |
fomc | 2,006 | Right. | 2 |
fomc | 2,006 | That is a long answer to what I really should say: Yes, you are right. We don't have enough observations to really know. | 27 |
fomc | 2,006 | Two-handed intervention. President Moskow. | 8 |
fomc | 2,006 | I just want to ask Vince a question on the word "possible" in the third row here. Could you elaborate on why you put that word in? It just says, the way it said before, that increases in resource utilization have the potential to add to inflationary pressures. I mean, there have been increases in resource utilization. | 67 |
fomc | 2,006 | So some concern was expressed that having dropped the word "possible" relative to what was in January, the Committee would be making the determination that, indeed, economic slack had gone away and that the channel itself would put upward pressure on inflation. | 48 |
fomc | 2,006 | But capacity utilization is higher. The unemployment rate is lower. | 12 |
fomc | 2,006 | Right, but I think the issue there is that it is true that resource utilization has tightened, but then to make the determination that it could add to inflation pressures is to say that it, in fact, has gone past the level of full capacity--that is, the unemployment rate is below the natural rate and output is above ca... | 95 |
fomc | 2,006 | President Poole. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. I take it that you would like us to give the policy recommendation that we would favor at this point? | 28 |
fomc | 2,006 | No, let me clarify. I'm sorry. We're still in the question mode. | 16 |
fomc | 2,006 | Oh, okay. I thought we were starting the round. | 12 |
fomc | 2,006 | No. Do you have a question? | 8 |
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