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fomc
2,006
Do you or your staff have a view on the breakdown between the term premium and future expected rates in terms of the far forward increase in interest rates?
30
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We've not tried to estimate an actual breakdown between those two things. We do look at models that estimate the term premium, but we've done some empirical work that suggests simply that movements in inflation compensation, the inflation risk premium, and longer-term TIPS yields tend to be correlated at long horizons....
69
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Thank you. President Lacker.
7
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Thank you, Mr. Chairman. Our readings on the Fifth District's economy very much parallel those for the nation as a whole. I'll be brief. Surveys show a marked pickup in manufacturing shipments and orders in March and April and ongoing growth in services activities. Retail sales indicators edged higher in April. The rea...
737
fomc
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President Lacker, one issue I have with these surveys is that, when they ask about price changes, they don't distinguish between intermediate goods and final goods. Of course, the final goods are what we care about. Have you tried to make that distinction in your surveys?
54
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Yes, we do on the manufacturing side: We have prices paid and prices received. In the service sector, we don't distinguish; we just ask. And we have separate retail and nonretail service sectors. On the manufacturing side, they are always pessimistic, so prices received never seem as though they're going up as fast as ...
135
fomc
2,006
President Moskow.
4
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Thank you, Mr. Chairman. Most of my business contacts indicated that overall economic activity remains on a solid footing and that resource utilization has tightened further. Both of the major temporary-help firms headquartered in our District said that hiring remains strong nationwide. They continued to say that skill...
853
fomc
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President Fisher.
3
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Mr. Chairman, at the last meeting, I reported the comments of a CEO of a big box retailer who said the economy was "amazing." I suppose the best summary of what I'm about to report to you in terms of my readings in the field--this time I assiduously talked to twenty-five CEOs and COOs, and I'll give you that list separ...
1,210
fomc
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My husband will attest to that. [Laughter]
11
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President Fisher, you don't see any drag from high interest rates or energy prices on this overall strength?
20
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The two house builders together built 700,000 homes; as you know, that industry is consolidating. I asked them point blank whether the rates are killing them. Now, you have to take this with some skepticism, but they said no. The real issue here is that this highly speculative medium is becoming incredibly liquid. Ther...
309
fomc
2,006
I'm still trying to understand that comment about the schizophrenia. [Laughter] President Poole.
19
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Thank you, Mr. Chairman. I'm not going to try to help you on that one. [Laughter] I'm going to try to be very brief here because I want to reserve more of my fair share of the time to the policy discussion. One of the problems with the anecdotal reports, of course, is the unsystematic way in which we do them. I'm well ...
232
fomc
2,006
Wait a minute. I have to make a two-handed intervention on that one. [Laughter]
20
fomc
2,006
Okay. Anyway, he said that their construction costs--for a store, I guess--have come in 27 percent above expectations. Their construction costs are even higher in the Gulf Coast area. He also said that Wal-Mart is in the process of raising starting wages in about 700 stores. This is the first time in eight years of tal...
516
fomc
2,006
President Poole, did your contacts have anything to say about the issue of whether the strength in retail sales was a seasonal factor or something else?
29
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2,006
Wal-Mart, of course, follows those numbers very closely. My contact said that it's very difficult to sort out what happens when Easter moves the way it does, particularly this time. He said he would just take March and April together. Those two months together came in at 3.8 percent, same-store comparison year over yea...
156
fomc
2,006
Thank you. President Minehan.
7
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Thank you very much, Mr. Chairman. Current economic conditions are fair to good in New England. Consumers report rising confidence, at least in the current situation. Manufacturers report solid domestic and international demand. Business confidence is also good relative to the current situation. Unemployment claims and...
955
fomc
2,006
Thank you. President Pianalto.
7
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Thank you, Mr. Chairman. Based on the reports from my directors and my business contacts in the Fourth District, the relatively broad-based growth of the first quarter appears to have carried over into April. However, their comments about the balance of the year are consistent with the moderating trend of the Greenbook...
539
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2,006
Thank you. First Vice President Stone.
8
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2,006
Thank you, Mr. Chairman. Economic activity in the Third District continues to advance at a solid pace. Growth in our region has been steadier than in the nation over the past two quarters. Payroll employment grew in each of the three states through March, and the three-state unemployment rate is now 41/2 percent. Our b...
932
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Thank you. President Hoenig.
7
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2,006
Thank you, Mr. Chairman. Let me start with our District. Evidence from the District continues to show strong growth. While consumer spending has shown some modest slowing, retailers remain very optimistic in our surveys about future sales, and this despite some of the recent increases in energy prices. Manufacturing ac...
567
fomc
2,006
Thank you. President Guynn.
7
fomc
2,006
Thank you, Mr. Chairman. Since our last meeting, regional data and anecdotal information from our various contacts suggest that the Southeast region economy continues to have good momentum. Let me comment on just a few specific areas where what we're seeing in our District may help to inform our view of the larger nati...
1,369
fomc
2,006
Thank you. President Stern.
6
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2,006
Thank you, Mr. Chairman. The District economy continues to perform well, and the ongoing expansion is broadly based. Given that summary, let me just comment on three particular areas, beginning with a few things of interest that came out of a breakfast we had a couple of weeks ago with the leaders of the Twin Cities fi...
638
fomc
2,006
Thank you. Vice Chairman Geithner.
9
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Thank you, Mr. Chairman. The basic contours of our forecast are essentially unchanged since March and are very similar to the Greenbook's. However, the balance of risks has changed a little in our view, somewhat to the upside on inflation. But as in March, we expect core PCE inflation to run a little over 2 percent in ...
1,600
fomc
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I will comment as well on TIPS spreads, but those markets are fairly concentrated, and therefore, liquidity issues sometimes play a role in these high-frequency movements.
32
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I agree. I am not sure that the movements are that large and that you can attribute that much to these differences, but I do think you want to look carefully at what happens to those expectations when expectations change about monetary policy in the near term. It is that pattern which is somewhat disconcerting.
61
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Governor Olson.
3
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Thank you, Mr. Chairman. Mid-May in an election year is a good time to look at the effect of the fiscal budget on the economy. In an election year, any legislation that has not largely moved toward passage by Memorial Day likely is not going to happen. We have seen reports of federal receipts received to this point, an...
840
fomc
2,006
Thank you. Governor Kohn.
7
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Thank you, Mr. Chairman. I agree with many of the rest of you that inflation risks rose over the intermeeting period, though I think I see a more limited rise than I sensed from some of the comments I have heard. Several factors do suggest higher inflation risk. Stronger growth than expected has left resource utilizati...
1,121
fomc
2,006
Governor Bies.
4
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Thank you, Mr. Chairman. In preparing for the meeting, one of the things I focused on was the graph that I like that tracks the staff forecasts over time because I am really torn between where I see growth going and where I see inflation expectations. In looking at the graph, one can clearly see, if you look back throu...
1,150
fomc
2,006
Thank you. Governor Warsh.
7
fomc
2,006
Thank you, Mr. Chairman. I hesitate to joke here at my second FOMC. I made a joke at my first that the inaugural meeting requires the new Governors to sing, and my colleague took me up on that. [Laughter] So I will not offer a joke about dancing this time. [Laughter] In the interest of time. [Laughter] Going to the cen...
1,537
fomc
2,006
It worries me that we are in the hands of some exuberant 30-year-olds. [Laughter]
22
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He had to rub it in. [Laughter]
11
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2,006
Governor Kroszner.
6
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2,006
Thank you very much, Mr. Chairman. You will hear me singing a familiar song from last time, although not exactly the same song, and unfortunately I did forget my tap shoes. The song that I want to sing from last time is the continued strength and resilience of the economy plus concerns about inflation expectations movi...
1,058
fomc
2,006
Thank you, and thank you all for your very concise comments. [Laughter] We will take a fifteen-minute coffee break.
26
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At this point I would normally try to summarize the remarks around the table. But since you have all just heard them and since my own views are not terribly different from many who have spoken, I think in the interest of time I will just go ahead and talk briefly on my own behalf about what I see the economy doing, and...
1,297
fomc
2,006
2 Thank you, Mr. Chairman. Over the intermeeting period, the data came in stronger than the tone of the Committee's deliberations in March would have led any listener to suspect. As a result, Committee communications that reflected that discussion--including the minutes, speeches by some of you, and the Chairman's test...
1,422
fomc
2,006
Thank you, Vincent. Are there any questions for Vincent? If not, I hope we can have a go-round and have people's views on the policy. President Lacker.
35
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2,006
As I said before, I think we are essentially okay on the real side, but my concerns have risen about inflation. I recognize the potential for slowdown later this year, but my sense is that our inflation problem is much more of an immediate issue for us. I think we have to take seriously the possibility that inflation e...
502
fomc
2,006
Thank you. President Poole.
7
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2,006
Thank you, Mr. Chairman. I have some notes. I do not usually write them out, but I have them written out today. First, let me say that I agree with the comment that Governor Warsh made awhile back that the economy is strong and has excellent growth prospects. The economy is not fragile, and our job, of course, is to ke...
1,705
fomc
2,006
Thank you. President Hoenig.
7
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2,006
Thank you, Mr. Chairman. I want to share, as I did the last time, a little different perspective on this. I continue to agree with the Greenbook and others' projections that the economy should slow as we move through the rest of this year and next year. I think that's an important factor to consider because the policy ...
417
fomc
2,006
Thank you. President Fisher.
6
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2,006
Well, I think Bill Poole has summarized a lot of what I would have said. I forecasted that in the memo that was sent around. I would advocate tightening 50 basis points. I would dispute only one comment of President Poole's. Getting ahead of the markets is less important than getting ahead of the economy. I do take not...
498
fomc
2,006
Thank you. President Minehan.
7
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2,006
Thank you, Mr. Chairman. In the last couple of meetings I have had concerns that I think others are sharing, or did share, that we not go too far in this round of tightening, given what I thought were perhaps transitory price pressures, some extra capacity in labor markets, and financial markets that were finally becom...
640
fomc
2,006
It's the belt-and-suspenders approach. [Laughter] However, when we get to the final discussion, I'll ask for a straw vote on whether to drop row 5.
37
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2,006
Thank you. That's it.
6
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2,006
President Pianalto.
4
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2,006
Thank you, Mr. Chairman. As I stated earlier, I basically agree with the staff's current baseline projection that, with the rate action today, we have a monetary policy that supports the return of GDP growth to somewhere near its long-term potential, along with both core and headline inflation beginning to turn back do...
795
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2,006
Thank you. Governor Kohn.
7
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2,006
Thank you, Mr. Chairman. I'd actually rather think about the metaphor of President Fisher--full frontal nudity--for our subcommittee than I would about the weapons of mass destruction and attack. [Laughter]
43
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2,006
I never used the word "nudity" now. [Laughter]
15
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Full frontal. Okay. [Laughter]
9
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Take it out of the transcript. [Laughter]
11
fomc
2,006
"Let's move on to monetary policy," he said blushing. [Laughter] I think we do face an interesting and challenging situation here. I agree, as I said before, that the inflation risks are higher than they seemed a month or two ago and appear more palpable, more immediate, than they did. That has to be balanced against a...
502
fomc
2,006
President Stern.
3
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2,006
Thank you, Mr. Chairman. Overall, I think policy is currently well positioned to maintain price stability over time, and a 1/4 point increase today, which I favor, will on the margin enhance that position. As I noted earlier this morning, I do think the uncertainty about the inflation outlook has increased, and it may ...
258
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President Moskow.
4
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2,006
Thank you, Mr. Chairman. I favor the 25 basis point increase, and, generally, the language of alternative B. But I do have some specific suggestions on it that I'll mention at the end of my comments. First, I want to say a few words about a topic that many of us have been speaking about publicly, which is our price sta...
531
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First Vice President Stone.
5
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Thank you, Mr. Chairman. Given that I see the risk to growth as reasonably balanced and the risk to inflation as slightly more to the upside, I support raising the funds rate 25 basis points. With resource utilization at high levels and core inflation near the top of the range I consider consistent with price stability...
500
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2,006
Thank you. President Guynn.
7
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Thank you, Mr. Chairman. Let me see if I can be reasonably concise. First of all, I don't think we have any viable alternative except the 25 basis points of tightening today, so I support that. We've probably had more consensus around the table this morning than I remember in a long time about the way we want to convey...
412
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President Yellen.
4
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Thank you, Mr. Chairman. I support alternative B. I favor raising the funds rate 25 basis points, not 50 basis points, today. The statement helps us get off the treadmill we've been on and enhances flexibility, but it doesn't tie our hands into pausing in June if the data between now and then are so strong as to necess...
591
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2,006
Thank you. Governor Olson.
6
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2,006
Thank you, Mr. Chairman. I suppose I could just support the comments that President Yellen made and shut up, but I won't. [Laughter] I recall in previous meetings that I said that increases would be harder and harder to justify, and I certainly expected that by this time we would have paused, although I do believe that...
350
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2,006
Governor Bies.
4
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Thank you, Mr. Chairman. I support a 25 basis point increase at this meeting, and I like the changes that have been made to alternative B because I wanted to make sure that we came out of this with a statement that left our options open at the next meeting. While the recent inflation trends--recent being the last six m...
325
fomc
2,006
Governor Kroszner.
6
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I agree with the 25 basis point move at this time. I think we have seen some beginnings of evidence of heightened inflation risk relative to six weeks ago, and I think it is also very important, as President Yellen mentioned, that looking back historically, we do not want to get too far out ahead and then have some reg...
643
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2,006
Thank you. Governor Warsh.
7
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2,006
Thank you, Mr. Chairman. I support alternative B and would like to echo Governor Kroszner with respect to the reference to inflation expectations remaining contained. In light of where the market's expectations are, for better or for worse going into today and June, the omission of that language would be a very loud om...
464
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Vice Chairman Geithner.
6
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2,006
Thank you. My sense is that we probably have a bit more to do, and it would be helpful to signal that. Of course, we cannot be sure we have more to do, and we certainly cannot be sure how much more, if anything, we have to do. We have sort of debated two views on the optimal path going forward at various times. One opt...
405
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2,006
Thank you. Let me just talk a bit about the policy option and the statement. I think we are facing two goals that are difficult to achieve at the same time. The first one is to respond to some increase in inflation risk and what might be a bit of an inflation scare in the bond markets. In order to respond to that, we w...
696
fomc
2,006
Instead of saying "remain," you could just say "are."
13
fomc
2,006
Or "are contained."
5
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2,006
"And inflation expectations are contained."
6
fomc
2,006
Well, I would say "remain" because, remember, it is even after the change. They were contained before, and now they remain contained, despite the increase.
34
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2,006
Yes, but "remain" seems to me to say that they are at the same level as they were before, whereas "are" says they are in the container.
34
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2,006
No, it just says they are still contained. President Moskow.
14
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Mr. Chairman, I like the change you suggest. The important point is for the outside world to be aware that we recognize there has been a change in inflation expectations. I mean, if we keep it exactly as we had it before, we look as though we are not aware of what is happening in the marketplace. So I think your change...
75
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Is there anyone who has an opposite view?
9
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I think as you said, Mr. Chairman, putting in number 4 that we are singling out one of the two objectives--addressing inflation--is going to be perceived as a hawkish move relative to what we had before. Therefore, I do not think making the additional change is necessary because I think that has largely been conveyed. ...
127