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fomc | 2,006 | No. | 2 |
fomc | 2,006 | Governor Olson, do you have a question? | 9 |
fomc | 2,006 | No. | 2 |
fomc | 2,006 | We have some breakdown here in our system. [Laughter] Are there further questions for Vincent? President Lacker. | 24 |
fomc | 2,006 | I am curious about the question Janet asked in a memo last week about singling out slower productivity growth or--what was it?--productivity gains. Doesn't that phrase sort of convey some implicit theorizing? | 42 |
fomc | 2,006 | Heaven forfend. [Laughter] | 10 |
fomc | 2,006 | Well, that seems be the point of the question. I was just wondering what you thought about it. | 21 |
fomc | 2,006 | I would note that, in your discussion of the economy yesterday, a number of you did point out that a well-maintained trend in productivity is holding unit labor costs in check. I am not doing well in facial expressions, but yes. So I will take your objection as saying that this is, in fact, an inner working in the infl... | 97 |
fomc | 2,006 | So it is consistent with the world in which the policy function we are expected to follow has nominal compensation growth not responding to productivity growth changes. Productivity growth changes, and it changes unit labor costs. It doesn't change compensation growth. So it has inflation responding to changes in produ... | 56 |
fomc | 2,006 | I guess I would have to admit that the words are not that clear. What we meant rather was that, for the given increases in compensation, structural productivity growth has kept unit labor costs from expanding more than they would otherwise. | 45 |
fomc | 2,006 | Then it is a statement like these arithmetical contributions to GDP. | 15 |
fomc | 2,006 | Right. | 2 |
fomc | 2,006 | Well, okay. It is a different statement. | 10 |
fomc | 2,006 | In the go-round I am interested, of course, in your view on the policy action, and I am also interested in your view on the statement. So that would also be an appropriate place if you want to raise issues about the wording. That would be fine. Other questions for Vincent? Vice Chairman. | 62 |
fomc | 2,006 | Dave Stockton gave us a gentle admonishment yesterday to clarify our inflation preferences. At least that is the way I interpreted it. You can interpret it that way or that he responded to a question by suggesting that, in the absence of that clarity, [laughter] the staff should not be vulnerable to the criticism appli... | 146 |
fomc | 2,006 | Nineteen. | 4 |
fomc | 2,006 | Page 19. You can get one set of answers to that. You have not given us this time the perfect-foresight, optimal-policy-rule type of prisms to look at the same question. But could you give us just a little sense of whether it matters now? | 57 |
fomc | 2,006 | Well, as part of the discussion from yesterday, these policy rules are pretty inertial, and in the seven quarters of data to the right of the forecast line, you're not really going to see a material difference from your choice of inflation objectives. As you can see in the table, it really means only 10 basis points fo... | 168 |
fomc | 2,006 | Obviously, in addition to the importance of the target or the objective itself is your degree of patience or impatience about getting there. When we construct the extended Greenbook, in some sense we don't get to the objective very quickly just because there may be inertia in policy. That's up to you to make a decision... | 196 |
fomc | 2,006 | Other questions? President Pianalto. | 7 |
fomc | 2,006 | Vincent, in your comments about the Desk survey and what markets are anticipating, you said that they anticipate little change in the statement. But there have been some concerns--and, in fact, even a short article in the Wall Street Journal today mentions--that if there is no change in the statement that was made in J... | 113 |
fomc | 2,006 | The words in alternative B were designed to try to keep the prevailing path for policy expectations, and that's one of the reasons they are different from what is in the leftmost column from the January FOMC statement. I think I agree with your assessment that, if you merely repeated the January statement, then market ... | 89 |
fomc | 2,006 | But then it has also built in an expectation of another action at the next meeting. | 17 |
fomc | 2,006 | Right. | 2 |
fomc | 2,006 | And so, when they expect little change, it is hard to know whether it is no change in paragraph 4 versus little change in the rationale statement. | 31 |
fomc | 2,006 | We retained the words of row 4 but not the assessment of the economy. And that is one reason we give so many reasons that inflation prospects may be favorable--the idea that market participants would read this to mean that you are inclined toward tightening but see reasons why you may not have to do much. | 61 |
fomc | 2,006 | Vice Chairman Geithner. | 6 |
fomc | 2,006 | I want to echo Vince on the question raised by President Pianalto. If you look at current expectations now and as the Desk survey tells us something about the assumptions behind those expectations (though it's not a perfect proxy for them), there's a high probability of a move today, a significant probability that the ... | 181 |
fomc | 2,006 | Yes. | 2 |
fomc | 2,006 | Question, President Fisher? | 5 |
fomc | 2,006 | Mr. Chairman, I just wanted to ask Vince a somewhat radical question. Assuming that the Committee votes to tighten another 25 basis points and the language roughly is what you have in column B, I'm curious as to what you think or maybe Dino and the others think the market reaction would be if we eliminated row 4 in its... | 68 |
fomc | 2,006 | My suspicion is that they would think you're done. No guidance on interest rates means that you're not likely to act. | 23 |
fomc | 2,006 | So you are saying that we should tip our hand that we want to maintain or we should indicate further policy firming--sort of like President Pianalto's question. | 33 |
fomc | 2,006 | I think it is almost impossible to be absolutely neutral. The choice that you have to make is almost binary. | 22 |
fomc | 2,006 | That is what I mean. | 6 |
fomc | 2,006 | You can take out row 4, and then the market says, "Okay. They are done." Or if you repeat the present language, then it sort of confirms, with a certainty or near certainty, that there will be another move in May and some possibility of another move after that. I think it is very hard to be purely neutral. | 70 |
fomc | 2,006 | Essentially the Committee is repeating its frustration back in 1999, when it immediately published the directive with its announcement and it seemed that the tilt in the directive to the effect that the Committee was more likely to raise rates than lower them was read as more predictive of your future action than many ... | 107 |
fomc | 2,006 | Other questions for Vince? Okay. So let's begin our policy go-round. I'm interested to hear your views on policy action, the statement, and anything else you think bears on our decision. Governor Kohn. | 42 |
fomc | 2,006 | Thank you, Mr. Chairman. I think we're getting to the difficult but interesting part of this tightening cycle. It's always very difficult to be preemptive and forward looking. And with rates having risen to where they are, it's getting harder. Reacting to the most recent data does risk overshooting, and I think those T... | 1,275 |
fomc | 2,006 | Thank you. President Poole. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I certainly favor an increase of 25 basis points in the funds rate. And I also think that, given what we think we know from our current information about the state of the economy, it's highly probable that when we come up to our next meeting we will want another 25 basis points. That's my view ... | 752 |
fomc | 2,006 | Thank you. Governor Olson. | 6 |
fomc | 2,006 | Thank you, Mr. Chairman. I, too, support the 1/4 point increase, and I'm persuaded today by the theme I hear repeated that we want to maintain confidence in the Federal Reserve. I was particularly taken with President Stern's statement that his read on the people he's talking to is that the Fed would not allow inflatio... | 267 |
fomc | 2,006 | Thank you. President Fisher. | 6 |
fomc | 2,006 | Mr. Chairman, this issue of tightening is kind of like Pascal's wager about the existence of God, and our personal gain-loss ratio as central bankers indicates an answer in the affirmative. That is, I do think Vice Chairman Geithner made a very good point about expectations and about the expectations of how we will per... | 254 |
fomc | 2,006 | Had to put that in there. [Laughter] President Hoenig. | 15 |
fomc | 2,006 | Thank you, Mr. Chairman. I have a slightly different view. I would go with A. I wouldn't dissent over it if I were a voting member, but I would push very hard for signaling that we are just about at the end. And here is a bit of my reasoning. I think we are at or in the area of equilibrium in terms of the fed funds rat... | 485 |
fomc | 2,006 | Thank you. President Lacker. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I'm reasonably comfortable with the stability of inflation and inflation expectations right now. But, frankly, they're a little on the high side for my taste, and I say this with due appreciation of the calculation problems that Governor Kohn alluded to. The expected CPI and the term spreads ar... | 684 |
fomc | 2,006 | Thank you. President Stern. | 6 |
fomc | 2,006 | Thank you, Mr. Chairman. Let me just comment on a few things. First of all, I support increasing the federal funds rate another 1/4 percentage point today. I think that's consistent with the Greenbook forecast, with which I'm comfortable, and it's clearly what market participants expect. And I don't think this is a tim... | 347 |
fomc | 2,006 | Thank you. President Pianalto. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. As I said yesterday, the Greenbook baseline captures the broad contours of my expectations--namely, solid growth going forward and projections for inflation moving downward over the forecast period. But that baseline is broadly the same forecast that we received in January, and in January it wa... | 680 |
fomc | 2,006 | Thank you. First Vice President Stone. | 8 |
fomc | 2,006 | Thank you, Mr. Chairman. I support a 1/4 point increase in the federal funds rate. I think, as we said yesterday, the risks to growth are balanced. Risks to inflation are moderately tilted to the upside, with core inflation near the top of the range that I feel comfortable with. Any positive aggregate demand shock coul... | 290 |
fomc | 2,006 | President Minehan. | 4 |
fomc | 2,006 | Thank you very much, Mr. Chairman. I much appreciated the change in the format of the meeting whereby you summarized the general points of agreement yesterday and gave your own sense of the outlook. I thought that was a helpful change and something that was quite useful to me. I know that, as I sat down early this morn... | 1,000 |
fomc | 2,006 | Thank you. President Guynn. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I, too, favor a 25 basis point increase in our funds rate target today, and with that move and based on discussion that we had yesterday and this morning, I judge that we are close to being balanced. However, even at the point of presumed balance, I remind myself that a negative surprise on inf... | 636 |
fomc | 2,006 | Thank you. President Yellen. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I think overall we are in a good position at this point with the economy essentially at full employment and growth homing in on potential, which will, I hope, hold unemployment roughly steady. Core inflation is pretty steady although, at least by several measures and particularly the core PCE, ... | 1,558 |
fomc | 2,006 | Thank you. It is 11 o'clock. Why don't we take fifteen minutes for a coffee break? | 21 |
fomc | 2,006 | President Moskow, are you ready? | 8 |
fomc | 2,006 | Yes. Thank you, Mr. Chairman. I favor the 25 basis point increase and the language in alternative B. I do not think this is the time to keep our rates at the current level, and I don't think it's the time for us to give a signal that we are about to stop. The likelihood is that we will probably have to go to 5 percent,... | 939 |
fomc | 2,006 | Thank you. Governor Bies. | 7 |
fomc | 2,006 | We have a two-hander. | 7 |
fomc | 2,006 | Oh, I'm sorry. President Poole. | 9 |
fomc | 2,006 | I don't know whether this is fair or not. | 10 |
fomc | 2,006 | Absolutely. | 2 |
fomc | 2,006 | I have a proposal to offer here that makes use of the minutes, as Michael suggests. We make our statement after this meeting with minimal change and then use the minutes to say four things. One, the Committee believes that, after May, accommodation will have been largely removed. Two, policy will be responsive to the d... | 228 |
fomc | 2,006 | Thank you. Governor Bies. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I'm in support of a 25 basis point increase today. I am favoring alternative B, but I want to make some comments about the wording. One of the things I am struggling with, in addition to some of the points everybody has made around the table, is the apparent presence of a tremendous amount of l... | 408 |
fomc | 2,006 | Governor Kroszner. | 6 |
fomc | 2,006 | Thank you, Mr. Chairman. I also support the 25 basis point increase in the federal funds rate target. Obviously the question that we are dealing with now is not just optimal monetary policy but also optimal information disclosure and optimal communication policy. There are a lot of moving parts right now, a lot of chan... | 587 |
fomc | 2,006 | Governor Warsh. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. I, too, support the 25 basis point increase in the federal funds rate and would just like to make a couple of points about the market and market expectations. It does strike me as a particularly inopportune time to miss market expectations. Given the changes in the economy that we have discusse... | 703 |
fomc | 2,006 | Vice Chairman Geithner. | 6 |
fomc | 2,006 | Thank you, Mr. Chairman. I think we really do have a remarkable degree of consensus around the table about the forecast, and you did a very nice job of capturing that consensus. The consensus is really quite close to the Greenbook, closer than it has been perhaps in recent meetings. The Greenbook forecast is conditione... | 735 |
fomc | 2,006 | Thank you. Thank you for this very helpful conversation. It helps inform today's decision and also helps inform how we will be thinking about policy for the next few meetings. As I discussed, I see the economy as still being basically quite strong, and it needs to moderate to become consistent with its long-run potenti... | 904 |
fomc | 2,006 | I agree with the statement. But just on President Poole's suggestion for putting those four points in the minutes, I want to say that I don't think we should do it. I don't know what the process here would be. I mean, I don't think we should say that the accommodation has been largely removed in the minutes, which will... | 91 |
fomc | 2,006 | It illustrates the difference between the minutes and the statement. The statement is a consensus view or at least a median view. The minutes should express the range of opinion and would include that view but perhaps other views as well. Are there any other comments? Are we ready for a vote? | 57 |
fomc | 2,006 | I will read the directive wording from page 25 of the Bluebook. "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... | 187 |
fomc | 2,006 | Thank you. We need to take an action. There will be a short break. [Recess] | 21 |
fomc | 2,006 | All right. We would like to return to the meeting and discuss briefly the format of today's meeting, and also we need to make a few decisions about what we're going to do in May. Debbie is going to introduce the discussion. | 46 |
fomc | 2,006 | 3 The next item on the agenda calls for us to address the date of the next meeting, which the Chairman has indicated that he wishes to confirm for Wednesday, May 10. More broadly, however, this is an opportunity, while memories are still very fresh, to review the experience of this meeting and to think about possible e... | 523 |
fomc | 2,006 | We're open for comments on the format or suggestions for the future. President Guynn. | 17 |
fomc | 2,006 | I like what we did--there's a lot to like about the last two days. I think we ought to give ourselves several two-day meetings and see if we can get really comfortable with the notion. I certainly felt more comfortable. I detected comfort around the table. I still found the first go-round a bit tedious. And if we're go... | 198 |
fomc | 2,006 | Thank you. President Minehan. | 7 |
fomc | 2,006 | I'm more or less in agreement with Jack's position here. I thought this meeting went extremely well. The format feels more comfortable, and I think it will get more comfortable as we get more used to it--in particular, the interaction between people, which is a little different from what used to happen and I think is h... | 518 |
fomc | 2,006 | President Hoenig. | 4 |
fomc | 2,006 | First of all, I like the format much better--the fact that we have an opportunity to express our opinions on policy before we have to react to you does open the conversation, and it does allow you to not feel that you have to get your policy in during the initial go-round. Now, as to whether it's one day or two days, I... | 128 |
fomc | 2,006 | President Moskow. | 4 |
fomc | 2,006 | I agree with everything that Cathy Minehan said. I think she captured the reaction perfectly, that this meeting went very well. This is a point in the cycle when our policy decisions are particularly difficult, but there have been many times when they have been no-brainers. So maintaining some flexibility to have one-d... | 177 |
fomc | 2,006 | President Lacker. | 4 |
fomc | 2,006 | Yes, I applaud the meeting format. I think it has gone really well. I think you did a good job as interlocutor. Is that how you say it? [Laughter] I hope in upcoming meetings that we can carve out a little time for understanding our different views about the structure of economic relationships that underlie our policy ... | 95 |
fomc | 2,006 | President Poole. | 4 |
fomc | 2,006 | I like the format of the meeting for reasons already discussed. I would hate to lose the special topics that we have done twice a year. I think that's what Jeff was referring to. I think they have been very valuable. I'd also point out that there's a practical problem. Many of the boards of directors of Reserve Banks m... | 148 |
fomc | 2,006 | President Pianalto. | 4 |
fomc | 2,006 | I was just going to add that I agree with everyone's statements about the format. I like it. I thought splitting the policy from the economic go-round was very good. I was going to add what Bill just mentioned--special topics--because I think that there are several that we should give more time to. So if we go to a two... | 115 |
fomc | 2,006 | Thank you. Governor Bies. | 7 |
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