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fomc | 2,006 | President Guynn. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. Given our recent disappointing inflation experience and, more important, our forecast that suggests that inflation is likely to move at least somewhat higher over the forecast period, I'm solidly in favor of a 25 basis point move today. Like some others, I am less sure about the need for furthe... | 1,007 |
fomc | 2,006 | President Guynn, I just want to make a comment that, when I give my testimony, I will have the Committee's forecasts for year and a half ahead, which are conditioned on optimal monetary policy; so I'll be able to say that this is what we think we can achieve reasonably over the next year and a half. Any issue of where ... | 199 |
fomc | 2,006 | Thank you, Mr. Chairman. With our decision in May to set the federal funds rate target at 5 percent, I felt that we had moved the fed funds rate to a level that was slightly above neutral. I thought at that time that the cumulative effects of our previous actions, along with other elements in the outlook, might enable ... | 671 |
fomc | 2,006 | Thank you. President Minehan. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I'm in favor of increasing rates 25 basis points. I like to think I'm in favor of it not because that's what the markets expect but because it's the right thing to do. At some point, I hope we can surprise the markets by doing the right thing but not having it be necessarily what's fully expect... | 628 |
fomc | 2,006 | Thank you. First Vice President Stone. | 8 |
fomc | 2,006 | Thank you, Mr. Chairman. I support raising the funds rate 25 basis points, both on the merits and for our credibility. On the merits, I think that certainly, as we discussed yesterday, the risks to growth are higher than they were at the May meeting but inflation risk and the recent news on inflation are certainly tilt... | 233 |
fomc | 2,006 | Thank you. President Hoenig. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I'm glad that everyone agrees that the strength of a good committee is for someone to disagree, because my preference, based on the assessment of the outlook, is to maintain the funds rate at 5 percent, and I would vote accordingly if I were a voting member. Even though the financial markets cl... | 594 |
fomc | 2,006 | President Hoenig, I think everyone around the table admires you for your consistent position. [Laughter] | 22 |
fomc | 2,006 | That's a generous word, but thank you. [Laughter] | 13 |
fomc | 2,006 | Mr. Chairman? | 4 |
fomc | 2,006 | President Minehan. | 4 |
fomc | 2,006 | I just want to step in and say that I totally agree with Tom Hoenig's statement. At a time when things are so uncertain, it would be really good if all of us could watch the language that we use and not get ourselves into a situation where we feel, which I know I do, pre-committed to something. I'm in favor of this mov... | 133 |
fomc | 2,006 | Thank you. President Moskow. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I agree with the 25 basis point increase that you proposed. Let me make a couple of comments. First, people have used the words "modest restraint," and "mildly restrictive." If we are somewhat restrictive, it's really not very restrictive. We have increased interest rates 75 basis points since ... | 602 |
fomc | 2,006 | Governor Kroszner. | 6 |
fomc | 2,006 | Thank you, Mr. Chairman. I, too, support a 25 basis point move at this meeting, and I share the objectives that many of the people around the table have. I think we may have a bit of a disagreement on how to achieve this objective through the words in the statement. In the first part of the rationale, our talking about... | 886 |
fomc | 2,006 | Thank you. Governor Bies. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. First, I support the 25 basis point increase at this meeting, and as several people have said, I think the real issue is what we signal going forward. Let me refer to some comments already made and respond to some of my colleagues. President Poole, I'm sort of right where you are: I'm thinking ... | 666 |
fomc | 2,006 | Thank you. Governor Warsh. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. Let me support the move of 25 basis points on the merits. I don't feel as though I'm constrained by market expectations for this meeting; rather, on the merits, I think that's the right thing to do. Before getting into a discussion of the language, maybe I can give a couple of perspectives, Mr.... | 1,118 |
fomc | 2,006 | Thank you. President Poole. | 7 |
fomc | 2,006 | Just very quickly, I think we should remember that the core PCE index comes out tomorrow. If that's an unfortunate number, it's going to be right up against what we say, and people might say, "Some inflation risk? We've got a bad number. Where are these guys anyway?" So I would vote for taking the "some" out and for sa... | 79 |
fomc | 2,006 | Vice Chairman Geithner. | 6 |
fomc | 2,006 | Thank you, Mr. Chairman. I would read our discussion yesterday as implying a central tendency to our forecast of an economy that's growing basically at potential over the forecast period with a trajectory for inflation that is higher than we'd like if it were to extend over time and that moderates slowly and modestly o... | 1,129 |
fomc | 2,006 | Okay. Thank you all very much. Jeff. | 10 |
fomc | 2,006 | Just a couple of comments in response to a few things, if that's all right, Mr. Chairman. | 21 |
fomc | 2,006 | Certainly. | 2 |
fomc | 2,006 | First, the statement language that we've been using in row 4 to try to influence the probability that we'd like to see immediately after the statement of the next move has conflated two things. It has combined our assessment of the probability of various data coming in and our intentions about how we're likely to react... | 519 |
fomc | 2,006 | President Minehan. | 4 |
fomc | 2,006 | Not to beat a dead horse here, but I think we have to be sensitive to the fact that we're going through a very difficult time right now. After two or three years of the market's having a good deal of certainty about exactly what we were going to do, seeing no other path for policy but up from very low levels, we're in ... | 272 |
fomc | 2,006 | Well, let me thank you all very much for your extremely helpful and useful comments. I, too, think that we should raise 25 basis points at this meeting. I think it's justified by the basic economic situation. The greater risk seems to be from inflation. I think also, following some things that President Lacker said, th... | 1,031 |
fomc | 2,006 | I guess I don't have any concern with doing it, except that I wouldn't know how to answer a question about why we took it out of the formulation after having it in for some time. Every change we make to the statement has to meet that test, and I'm not sure how I would explain it, although I think I agree with you, Gove... | 95 |
fomc | 2,006 | I was just suggesting a change owing to comments from some of the folks trying to interpret us. Whenever a piece of data comes out, the market reacts, and that reaction is part of the volatility. To the extent that the data are anticipated, they are implicit in our forecast, and we don't want to imply that every piece ... | 80 |
fomc | 2,006 | Let me say that I hope in my monetary policy testimony to talk a bit about our framework, our focus on the forecast and on the outlook, and the fact that we will not ever respond to any individual number. I would be quite happy to receive any suggestions that members might have about how to explain these issues. We'll ... | 85 |
fomc | 2,006 | Well, just a comment that we've changed "implied" to "determined." Is there supposed to be a difference? Again, it's a nuance, but will people focus on that change of word? Is "determined" stronger than "implied"? That's all. | 55 |
fomc | 2,006 | Yes. It's valid to change the word back to "implied." | 14 |
fomc | 2,006 | That would be fine. Good point, Sandy. | 10 |
fomc | 2,006 | Very good. President Moskow. | 7 |
fomc | 2,006 | I just want to clarify the point that Governor Bies and I were making. We were suggesting that we move the first half of the sentence in number 4, the clause "although the moderation in growth of aggregate demand should help to limit inflation pressures over time," up to the rationale part. In the last sentence of sect... | 125 |
fomc | 2,006 | It is, but logically you would have to say "ongoing productivity gains have held down the rise in unit labor costs, inflation expectations remain contained, and the moderation of the growth of aggregate demand would help to moderate." Then you say "however," signaling that these are the things that we are really worrie... | 184 |
fomc | 2,006 | Of course, I understand the logic, but if you do put it in section 4, as President Geithner said, it has a tendency to stay there. We have to see what it would look like in future meetings as well. If you then take it out, you have to question why you are doing so. | 66 |
fomc | 2,006 | Well, I think the risk assessment is going to change. We just changed the risk assessment from "further policy firming may be needed" to "risks remain." So I think that structure is somewhat more fluid than the other parts. Governor Kohn. | 53 |
fomc | 2,006 | I was going to make the point President Pianalto made. | 12 |
fomc | 2,006 | Good. I would like to put the recommendation on the table for 25 basis points and alternative B as modified by the one word "implied." You can take care of that later, Michelle? Do you have it to distribute? You've distributed it already? | 52 |
fomc | 2,006 | We can insert it. | 5 |
fomc | 2,006 | Fine. Could you please call the roll? | 9 |
fomc | 2,006 | I'll be reading the directive wording from page 29 of the Bluebook and the assessment of risk from the table that was handed out with Vincent's briefing. "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its l... | 223 |
fomc | 2,006 | Thank you. We have two very short items. We can perhaps do those, finish the meeting, and then have our coffee. But first, we'll be right back. [Laughter] [Recess] | 42 |
fomc | 2,006 | All right. Sorry for that interruption. We have a report now from the subcommittee on communications. Governor Kohn. | 24 |
fomc | 2,006 | Thank you, Mr. Chairman. I distributed a memo earlier this week, a report from our communication with you about how you would like to proceed going forward. The main thing I'd like to do is hear whether there's any reaction to that report. Very tentatively, our idea was to cover goals, broad strategies, and philosophy ... | 226 |
fomc | 2,006 | I certainly think that at the August discussion we need to settle on the policy, the underlying goals, and all of that. I, for one, am looking forward to an October discussion of inflation targeting about as much as I would be looking forward to a root canal. [Laughter] I would be happy to put it off for a standard two... | 103 |
fomc | 2,006 | Root canals save teeth that otherwise would be lost. No gain without pain. | 15 |
fomc | 2,006 | You could skip it. You could stay home. | 10 |
fomc | 2,006 | There's another way to avoid that, I can tell you. [Laughter] | 16 |
fomc | 2,006 | Any other comments or suggestions about these sorts of near-term paths? Hearing none, we'll do that. From talking with my fellow members of the subcommittee, I'm not sure that there's much background material we could provide for the August meeting. That will be a sort of broad philosophical discussion. If we think of ... | 216 |
fomc | 2,006 | What does that actually mean we are going to do in August? Are we going to have an existential conversation without facts, just a sort of general discussion about conviction? | 33 |
fomc | 2,006 | Several people thought that defining the goals would help structure the rest of the discussion, and they also had some philosophical points they wanted to make. This goes to your existential point, perhaps, about the best general, broad, strategic way of accomplishing those goals. I think it would be useful, and a lot ... | 147 |
fomc | 2,006 | I know I'm talking too much at this meeting, but with regard to August, I think it's also important--and this was the last item on your outline--to consider communications in a broad context, not in the narrow context of the statement. We communicate in a lot of different ways, and I think we need to recognize that in ... | 77 |
fomc | 2,006 | That is certainly the intention of the subcommittee. All right. Thank you very much. Ms. Danker. | 23 |
fomc | 2,006 | Just to follow up on the memo that was distributed summarizing the results of the survey on meeting format, that survey revealed a number of areas of clear agreement. The recent format with the separate go-rounds on the economy and policy is viewed as a good one, and there's little appetite for substantial change to th... | 733 |
fomc | 2,006 | Are there questions or comments for Debbie? President Poole. | 12 |
fomc | 2,006 | Does your tentative two-day meeting schedule, Tuesday-Wednesday, include the Wednesday right before I think most of us have board meetings? I have noted that, and I think it's a particular problem. I know Richmond has subcommittee meetings of the board Wednesday afternoon, and we do sometimes in St. Louis. I know that ... | 122 |
fomc | 2,006 | Actually I like missing my committee meeting. [Laughter] | 12 |
fomc | 2,006 | What is wrong with Monday or Tuesday in that sense? What makes it inconvenient--because Thursday is a crunch, particularly if you're going to travel a distance. | 31 |
fomc | 2,006 | Monday and Tuesday, again, was not the least distasteful option from the perspective of the survey respondents. | 22 |
fomc | 2,006 | It was also the most distasteful option from the perspective of staff, both at the Board and at the Reserve Banks, because it does interfere with the briefings many of you receive and just makes our life more complicated. I appreciate that that's not necessarily in your welfare function. | 56 |
fomc | 2,006 | Tuesday-Wednesday is fine if it's not right ahead of our board meeting. That's the issue. | 19 |
fomc | 2,006 | Is there a possibility of rescheduling some of the board meetings? Are they inflexible? | 18 |
fomc | 2,006 | We've had second Thursday every month for our meeting since day one as far as I know. | 18 |
fomc | 2,006 | I don't want to jump in here, but I suppose that, for the meeting in October, we could check with people about what days the 2007 meetings should be on. | 36 |
fomc | 2,006 | We will do our best to solve the over-determined system that you're telling us about. | 18 |
fomc | 2,006 | We'll distribute the precise dates in the next couple of days and then please just get back to us. | 20 |
fomc | 2,006 | Also remember that Debbie said Tuesday and Wednesday in part because we also have to line it up with the calendar of international commitments, which include BIS meetings and the annual meetings. So we start with Tuesday and Wednesday, but we may not get there. | 49 |
fomc | 2,006 | I have complete confidence in Debbie and Vincent to solve this problem. [Laughter] | 17 |
fomc | 2,006 | When will you announce the fact that we'll have a two-day meeting in October and December, and how will you explain it? | 25 |
fomc | 2,006 | I think the intention is to package the '06-'07 calendar together. We hope to have clearance from your offices before the end of July, at which point we'll go out with the calendar going forward. I'm sure our Public Affairs colleagues will assist us, explaining the additional meetings later this year on the basis of th... | 80 |
fomc | 2,006 | Remember that, by the time the calendar is released, the minutes of this meeting, the Monetary Policy Report, and the Chairman's testimony will be out, and we already had a marker in the Report to talk about the formation of the subcommittee. | 50 |
fomc | 2,006 | Any other questions? Thank you. The next meeting is on Tuesday, August 8. We are adjourned, and you can all join us for coffee outside. | 34 |
fomc | 2,006 | And lunch. [Laughter] | 7 |
fomc | 2,006 | I'd like to welcome President Plosser to the table. | 12 |
fomc | 2,006 | Thank you very much. | 5 |
fomc | 2,006 | Charlie, welcome aboard. Let's start with the Desk operations. Mr. Kos. | 16 |
fomc | 2,006 | 1 Thank you, Mr. Chairman. At your last meeting I focused on the higher level of volatility that was concentrated in specific and fairly narrow asset classes, particularly emerging market currencies and equities. In the intermeeting period, volatility declined in those asset classes while staying low in a broader set o... | 1,502 |
fomc | 2,006 | Thank you. The transition to the new PSR policy is good news. Are there any questions for Mr. Kos? If not, we need a motion to approve operations. So moved, without objection. We turn now to the economic situation. Mr. Wilcox. | 54 |
fomc | 2,006 | Thank you, Mr. Chairman. Jack Brickhouse, the voice of the Chicago Cubs for more than thirty years, was more widely known for his knowledge of baseball than for his command of probability. When a Cub would step into the batter's box after an especially long string of hitless trips to the plate, Brickhouse would invaria... | 1,982 |
fomc | 2,006 | From the perspective of the global economy, one of the important revisions in this forecast from last time is the projected path for crude oil prices. We have incorporated into the baseline forecast a path for both West Texas intermediate (WTI) prices and the U.S. oil import price that is more than $5 per barrel higher... | 1,358 |
fomc | 2,006 | Thank you very much. Are there questions for David or Karen? President Poole. | 17 |
fomc | 2,006 | I'd like to put a question to you, but I want to do it in the form of an observation that I'd like you to comment on. It has to do with the inflation situation. Obviously, we are not in a situation anything remotely like that of the 1970s, but I do believe that we have very generalized inflation across sectors and acro... | 390 |
fomc | 2,006 | They should have been released by 8:30, I think. | 14 |
fomc | 2,006 | Maybe we'll see what happened there during the break. My argument is that we have very generalized inflation pressure across regions of the world and across commodity and service sectors. The pressure is not isolated. Could you comment on that observation? | 45 |
fomc | 2,006 | Broadly, I don't disagree that the acceleration in consumer prices is broadly based. It is sensitive to sample period. Michael Kiley's briefing yesterday to the Board touched on some of the same issues and presented an exhibit that displayed the median CPI as constructed by the Federal Reserve Bank of Cleveland and the... | 285 |
fomc | 2,006 | If I could just comment on the worldwide aspect of your point, I'd say that the one piece that's missing is that globally we have not seen this inflation pressure translate into an acceleration in wages and labor compensation--not so much here in the United States and not in rest of the world. Even in places where cent... | 283 |
fomc | 2,006 | Now that I've had a chance to take a breath--another factor that obviously is critical is the behavior of inflation expectations. As you know, the Survey of Professional Forecasters long-term measure has been flat, immovable, at 21/2 percent. The University of Michigan survey--which we show in the Greenbook table back ... | 170 |
fomc | 2,006 | President Moskow. | 4 |
fomc | 2,006 | President Poole asked a significant part of my question, or he presented a significant part of my question. [Laughter] But let me ask you about the markup part of this. You know, we have always thought that there was a cushion for compensation to go higher, for input costs to go higher, and for profit margins to shrink... | 142 |
fomc | 2,006 | So, they revised down. The implication of the NIPA revision is that, according to the latest estimates, those markups are a little lower than they were before. They are still noticeably above their historical averages. In the judgmental forecast, we have never placed an enormous amount of weight on those markup measure... | 292 |
fomc | 2,006 | And the unit labor cost trend hasn't caused you to change your outlook for the future either? | 18 |
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