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fomc | 2,006 | Thank you, Mr. Chairman. Since this is my last meeting, I want to say formally what an honor it has been to serve under your leadership, at least for a short while, and under Chairman Greenspan's leadership before that. And to my colleagues around the table and around the room, I want to say what an extraordinary exper... | 1,104 |
fomc | 2,006 | Thank you very much, Jack. President Stern. | 10 |
fomc | 2,006 | Thank you, Mr. Chairman. Let me make just two or three fairly general comments. First of all, I, too, want to compliment the staff for the paper on inflation dynamics. I think it was very well done. It is important, and we need to take it seriously, and I view it in some sense as a follow-up to some of the work that ha... | 395 |
fomc | 2,006 | Growth recession. | 3 |
fomc | 2,006 | Yes, something like growth recession. But the bottom line here is that it hasn't been a good idea to underestimate or underrate the performance of the U.S. economy since late 1982. Finally, with regard to inflation, even if I'm right about the economic outlook and we get more growth, I don't think that necessarily impl... | 107 |
fomc | 2,006 | Well, it's 11:00. Why don't we take fifteen minutes for coffee. Thank you. | 20 |
fomc | 2,006 | I think we can reconvene. Vice Chairman Geithner. | 13 |
fomc | 2,006 | Thank you. Let me just start with the broad contours of our outlook. Growth has obviously slowed. The second half is likely to be relatively weak, but the only place we see pronounced weakness is in housing, and we expect a return to moderate growth going forward. Core inflation seems to be easing a bit, and it may hav... | 1,468 |
fomc | 2,006 | Thank you. Vice Chairman ... Governor Kohn. [Laughter] | 14 |
fomc | 2,006 | Thank you, Mr. Chairman. Whatever you want to call me is fine. [Laughter] I'm just glad to be here. [Laughter] I don't think I can follow that up. Given the initial conditions--the doubling and more of energy prices over the past two years, the overexuberant housing market coming to grips with a renormalization of inte... | 998 |
fomc | 2,006 | Thank you. Governor Bies. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I want to start my remarks today by reflecting on some results of the latest Duke University CFO survey. This survey is only about six or seven years old, but the one that was just concluded on September 10 has CFOs' optimism at the lowest levels in five years, and so it's continuing to show an... | 975 |
fomc | 2,006 | Thank you. Governor Warsh. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I'd like to make four points, a couple of which have been stated by my colleagues this morning, and then spend a little time on each of them. First, like many of you, I am more concerned about the upside risks to inflation than downside risks to output and employment. Second, the markets respon... | 2,077 |
fomc | 2,006 | Thank you. Governor Kroszner. | 9 |
fomc | 2,006 | Thank you very much. Unfortunately, I think we find ourselves in an uncomfortable position like that of six weeks ago, with a continuing mix of inflationary pressures and decelerating economic growth at the same time. I think the fundamentals are in place for a continued moderation of growth but not a contraction, much... | 1,296 |
fomc | 2,006 | Thank you. Governor Mishkin. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. First, I just should say that it's a great pleasure to return to the Federal Reserve System--I have so many friends here at the table and around the table. It's also very nice to move to a slightly more comfortable chair. [Laughter] | 57 |
fomc | 2,006 | It's called the hot seat. [Laughter] | 10 |
fomc | 2,006 | Many of you know I have an upbeat personality--some might actually say loud--but certainly upbeat. The way I look at the forecast and the situation with the economy is quite positive in the sense that what we're seeing, really, is a return to normalcy and a more balanced economy. The excesses in the housing sector seem... | 559 |
fomc | 2,006 | Thank you. Let me just summarize quickly what I heard around the table, and then I'd like to make some additional comments of my own on the economy. The sense is that, on the real side, there's a two-tier economy. There's the housing sector and maybe autos, and there's everything else. On housing, there's agreement tha... | 2,085 |
fomc | 2,006 | I only speak when asked, Mr. Chairman. [Laughter] | 14 |
fomc | 2,006 | That is a good practice. [Laughter] | 10 |
fomc | 2,006 | Since when? [Laughter] | 7 |
fomc | 2,006 | 3 Thank you, Mr. Chairman and some participants. [Laughter] Over the intermeeting period, tumbling oil prices, better-behaved inflation, and the minutes of the August meeting, which conveyed a more widespread disinclination to tighten than investors suspected, pulled nominal interest rates lower. As can be seen by the ... | 1,622 |
fomc | 2,006 | We are ready for the go-round now. Would anyone like to speak? President Poole. | 19 |
fomc | 2,006 | Am I the only taker to be number one? [Laughter] Thank you, Mr. Chairman. I want to start with two observations. First, the distribution of the market's outlook for the federal funds rate six months ahead--and the briefing paper that appeared in my hotel room last night has that shown on exhibit 1--is pretty symmetrica... | 1,019 |
fomc | 2,006 | Thank you. President Moskow. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I appreciate your passing out this sheet and talking about it. I think the lesson here is that these things do not always go as gradually as forecast, and once things get going in one direction, there is more momentum than is built into our longer-term forecasts. In terms of policy, as you know... | 405 |
fomc | 2,006 | Thank you. President Stern. | 6 |
fomc | 2,006 | Thank you, Mr. Chairman. Well, so far it looks as though our decision to pause at the last meeting was a sound one, and I emphasize "so far" because we obviously have not received a lot of additional information. I think the reaction in the financial markets has been encouraging in that, as best as I can judge, the new... | 260 |
fomc | 2,006 | President Fisher. | 3 |
fomc | 2,006 | Well, Mr. Chairman, I am somewhere between Mr. Moskow and our distinguished president from Minneapolis, but I am biased toward B+. My board, as I indicated earlier, was in favor of ratcheting up the discount rate. One of their concerns that I did not voice in our discussion previously was about how permanent or, rather... | 445 |
fomc | 2,006 | Thank you. Governor Kohn. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I'm in favor of maintaining the current stance of policy. I think that is the best chance we have at this juncture for having growth modestly below the growth rate of potential and inflation gradually ebbing. I am not as dissatisfied with that path as maybe some others around the table. After t... | 591 |
fomc | 2,006 | President Hoenig. | 4 |
fomc | 2,006 | Mr. Chairman, based on my assessment of the economic outlook, I think we should maintain the funds rate at 51/4 percent, which as others have said is modestly restrictive, and I counsel what I would refer to as rational patience here as we work through this. I continue to hold the view that the current policy stance, a... | 354 |
fomc | 2,006 | Thank you. President Guynn. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I don't know how we would rationalize or explain a departure today from the pause that we decided on at our last meeting. Also, I think that what we have learned since our last meeting does not substantially alter our medium-term forecast. Therefore, I strongly favor another hold decision today... | 255 |
fomc | 2,006 | Thank you. President Pianalto. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I favored a pause at the last meeting, and I haven't really heard or seen anything since then that would cause me to change that view. Consequently, maintaining the pause seems like the right thing to do, and I favor the language in alternative B in communicating that decision. I would also lik... | 257 |
fomc | 2,006 | Thank you. President Plosser. | 8 |
fomc | 2,006 | Thank you, Mr. Chairman. At our last meeting, my inclination was to favor an additional 25 basis point increase in the fed funds rate. In my view, there has been very little change in the economic case for some additional policy firming. The incoming data have not persuaded me to think that growth would be considerably... | 1,094 |
fomc | 2,006 | Thank you. President Lacker. | 7 |
fomc | 2,006 | After looking closely at the new data since the last meeting, I do not see a compelling reason to materially alter my assessment of policy. I still think that the fed funds rate should be 51/2 percent to bring core inflation down rapidly enough. My preference is based on an assumption that we want to bring core inflati... | 494 |
fomc | 2,006 | Thank you. President Minehan. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. As I noted earlier, given the relatively subdued pace of incoming data, given the range of uncertainties that have been talked about, and given that we have already paused, I would continue to pause. I thought the exposition you gave about the point of no return was close to my own thinking, wi... | 515 |
fomc | 2,006 | Thank you. I assure you that the minutes will reflect the tenor of the meeting. President Yellen. | 21 |
fomc | 2,006 | Thank you, Mr. Chairman. It is still too early to know whether our current policy stance will succeed in lowering inflation to an acceptable level over time, but the data since our last meeting reassured me that our decision to step off the escalator was wise, and I think we should remain on the sidelines today. Recent... | 424 |
fomc | 2,006 | Thank you. Governor Kroszner. | 9 |
fomc | 2,006 | From a prudent risk-management perspective, I think we made the appropriate decision to pause at the previous meeting, and again from a risk-management perspective, I think we should continue to pause at the moment. Certainly there are downside risks to the outlook that we have talked about. The lagged effects of the i... | 707 |
fomc | 2,006 | Thank you. Governor Bies. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. First, I support no change today. I do not believe there has been enough information to change my mind from the last meeting. I support alternative B because I am concerned that B+ is more of a commitment that we are going to do something, and I am not ready to go that far. However, I agree wit... | 230 |
fomc | 2,006 | Thank you. Governor Warsh. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. Given our decision at the last meeting, I favor maintaining the pause today, and I favor alternative B. The judgment to pause, as well as the language around that, does in fact constrain our flexibility, and I think most of us recognized that going into our last meeting. In reviewing the langua... | 289 |
fomc | 2,006 | Governor Mishkin. | 4 |
fomc | 2,006 | Well, in contrast to some people here, actually I'm quite comfortable with the Greenbook forecast as to the most likely path of inflation. I am more troubled about what is further out beyond the policy horizon. I think that the most likely path of inflation is to hit 21/2 percent on the CPI and stay there, which is cor... | 382 |
fomc | 2,006 | Thank you. Vice Chairman Geithner. | 9 |
fomc | 2,006 | I was fairly comfortable with our decision in August, and I am fairly comfortable with that decision in retrospect. Whether we were wise or we have been lucky is something only history will judge. I would be more comfortable if there were a slightly positive slope to expectations about the future path of policy and les... | 427 |
fomc | 2,006 | Thank you all. Our pause at the last meeting was a benefit-cost calculation. The benefit of pausing was to give ourselves more time to assess the state of the economy and the effects of our previous interest rate actions. The potential cost of pausing was that we would lose some credibility, that inflation might move a... | 1,306 |
fomc | 2,006 | I would agree with taking it out. It's a good suggestion because, when you change the language from the last time, people focus on that, and putting it in will overemphasize the importance of it. | 43 |
fomc | 2,006 | I get a sense of nodding around the table, so let's strike the words "on balance" from section 3. "In part" was changed back to "partly" just to be the same as last time. We consulted with the style editor, and she assured us that there was no substantive difference between those two. [Laughter] So my recommendation th... | 118 |
fomc | 2,006 | I will be reading the language from page 25 of the Bluebook directive first. "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... | 179 |
fomc | 2,006 | Thank you very much. Our next meeting is a two-day meeting, and we will have the long-anticipated discussion of inflation targeting [laughter] on October 24 and 25. The meeting is adjourned. | 45 |
fomc | 2,006 | Good afternoon. Let me start by welcoming Pat Barron, First Vice President of the Federal Reserve Bank of Atlanta, who will be here in Jack Guynn's seat for today. | 36 |
fomc | 2,006 | Thanks. It's good to be here. | 8 |
fomc | 2,006 | Welcome. I have a bit of business to start with before we go to Dino. Last month the Congress passed, and the President signed, the Financial Services Regulatory Relief Act, which had a number of measures in it. Included among them were provisions that allow the Federal Reserve to pay interest on reserves and to reduce... | 204 |
fomc | 2,006 | Second. | 2 |
fomc | 2,006 | Thank you. Dino Kos. | 6 |
fomc | 2,006 | 1 Thank you, Mr. Chairman. I will be referring to the charts that were distributed, and I will divide my comments into two parts. First, a slimmed-down report on market developments in the intermeeting period, and then I'll touch on the highlights of the memo I circulated last week regarding management of the System Op... | 1,981 |
fomc | 2,006 | Are there questions? I see none. Do I have a motion? | 14 |
fomc | 2,006 | So moved. | 3 |
fomc | 2,006 | Second. | 2 |
fomc | 2,006 | The motion is passed without objection. Thank you very much. We'll turn now to the economic situation. Dave Stockton. | 23 |
fomc | 2,006 | Thank you, Mr. Chairman. About a week ago, as we were closing the forecast, I was marveling at how little it had changed over the intermeeting period--both the broad strokes and the details. But the warm glow of accomplishment had barely been kindled when a glance at my desk calendar revealed the source of our success.... | 2,571 |
fomc | 2,006 | Once again I find myself reporting to you that movements in global oil prices are among the developments during the intermeeting period that were factors in our deliberations about the external sector. Global crude oil spot and futures prices fell further following our September projection but by differing amounts over... | 1,483 |
fomc | 2,006 | Thank you very much. Are there questions? President Yellen. | 13 |
fomc | 2,006 | Thank you, Mr. Chairman. I have a question for David, and it concerns the Greenbook alternative scenarios and the morals we should draw from them concerning the Committee's ability to affect inflation. The Greenbook this time had two scenarios showing how the forecast would be affected by shocks to aggregate demand. On... | 510 |
fomc | 2,006 | I think, actually, your first story was the more potent one in offsetting these effects--that we'd have an exchange rate response to the monetary policy effect. Now, there is a small change in inflation expectations in response to your doing something the markets don't expect you to do given the macroeconomic outcomes.... | 97 |
fomc | 2,006 | Even when there are negative demand shocks and even though unemployment is rising? | 14 |
fomc | 2,006 | That is part of it--yes. Obviously, the question is whether they see those shocks as well. | 21 |
fomc | 2,006 | They would see unemployment rising. | 6 |
fomc | 2,006 | Well, they don't see that. The unemployment effects do take a while to begin to develop. All these things happen very slowly. If something is perverse here, it is that we're showing too short a time frame for the effects to actually play out. With an output gap opening up, we would obviously expect in this model that e... | 315 |
fomc | 2,006 | President Moskow. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. Dave, I want to ask you a question about residential housing markets and the effect of this slowdown that we've seen on the prices of housing. As you mentioned in your comments, we've seen the rate of increase slow. In one of the alternative simulations, you actually plugged in a major reductio... | 117 |
fomc | 2,006 | A little work has been done in this area, but it's a bit like modeling the stock market. You wouldn't take it very seriously in the sense that these are asset markets and they're sometimes moving in ways that are very difficult to model on the basis of, for example, fundamentals--especially in a period when, by our ass... | 402 |
fomc | 2,006 | Thank you. President Fisher. | 6 |
fomc | 2,006 | I have just an informational question, David and Karen. If my memory is correct, the September CPI numbers excluding food and energy were not substantially different from those in August. What I'm curious about, if you could just quickly comment, are the dynamics of owners' equivalent rent (OER). That was you, Dave. | 64 |
fomc | 2,006 | As you know, those increases were very substantial in the spring. We had projected them to slow some. They have slowed some. Whether that is noise in the data or an actual response to developments on the ground in housing such as--as I think Governor Bies has mentioned--the possibility that some of this flow of excess ... | 320 |
fomc | 2,006 | So, in summary, we are looking at high threes, upward. | 15 |
fomc | 2,006 | High threes in the near term on rents, going down, we think, to more like threes by next year. | 25 |
fomc | 2,006 | Karen, the most arresting figure, as you pointed out, is reported Chinese growth in the third quarter. What does that stem from? Is it their faux monetary policy or moral suasion or what we call, negotiating with the Chinese, "immoral suasion?" Or do you sense that some capacity constraints are at work here? | 67 |
fomc | 2,006 | Well, I don't know that we have enough detailed information to speak definitively to the question of whether some capacity constraints were reached. We do see the slowdown occurring, importantly, in the sector of fixed investment. That is, the GDP numbers themselves do not give us real component information, but other ... | 382 |
fomc | 2,006 | Thank you, Mr. Chairman. | 7 |
fomc | 2,006 | President Plosser. | 5 |
fomc | 2,006 | Thank you. As you suggested, labor force participation plays an important role going forward in how you think about your forecast of the longer-term growth rate and how it evolves. So I have two questions about labor force participation in trying to understand where it comes from and what's going on. One is the distinc... | 274 |
fomc | 2,006 | I'll turn your question around and address the trend aspect first and then discuss a bit how the cycle gets overlaid on this. Our forecast is based on some research that we've been doing in the past several years that was recently presented at the Brookings Panel on Economic Activity. It's based on a very detailed deco... | 856 |
fomc | 2,006 | Thank you. President Pianalto. | 7 |
fomc | 2,006 | Thank you. Dave, I have a question on the less-persistent inflation scenario. The description indicates that the scenario allows for inflation to be less persistent in the baseline perhaps for structural reasons. Could you give me a couple of examples of how the structure might change and what the data might tell us or... | 73 |
fomc | 2,006 | Clearly, if you have managed to achieve a significant degree of credibility and that credibility has anchored inflation expectations at a rate of 11/2 percent going forward and if, therefore, agents expect whatever inflation shock you've had to be temporary and for inflation to revert to its average over the past ten y... | 234 |
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