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fomc | 2,006 | Thank you. | 3 |
fomc | 2,006 | Any other questions? Dave and Karen, thank you, as always, for a very good report. We're ready now for the economic go-round. We haven't made much use of the two-handed intervention lately, but it's an option. If you want to make a comment or ask a question, please raise two hands instead of one. We'll start with Presi... | 73 |
fomc | 2,006 | Thank you, Mr. Chairman. Conditions in the Seventh District appear to be quite similar to what I reported last time. Except for housing and autos, activity remains on a solid footing, and most of our contacts are relatively optimistic about the outlook. For instance, the two large temp firms we talk to regularly both r... | 849 |
fomc | 2,006 | Okay, Governor Kohn. | 6 |
fomc | 2,006 | I wondered, President Moskow, if you had a sense of whether Ford was in a kind of death spiral--I might be influenced by the headlines of today and yesterday--at risk of losing the confidence of customers, so it won't be able to sell cars, and of creditors. I'm wondering whether that would have any effect on the macroe... | 91 |
fomc | 2,006 | My general assessment has been that this is a market share story. It's not a story of aggregate demand for automobiles or light vehicles in that it is a shift from the domestic, what we used to call the Big Three, to foreign manufacturers, whether they're producing here in the United States or exporting more to the Uni... | 278 |
fomc | 2,006 | President Moskow, didn't you say that you saw output growing below potential in '07? Did I hear correctly? | 23 |
fomc | 2,006 | Slightly. | 4 |
fomc | 2,006 | So with energy prices down and so forth, why do you see core inflation rising from near-term levels? | 21 |
fomc | 2,006 | No, I saw it coming down--oh, you mean in the outer years. Well, I think several things are going on. There is still the spillover of energy price increases flowing through the economy, but also there are more resource constraints than are built into the baseline forecast. | 57 |
fomc | 2,006 | President Minehan. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. The New England District economy continues to grow at a moderate pace, pretty much as it was growing the last time we met, with job counts slowly increasing and business and consumer confidence relatively good about both current and future conditions. As I've noted before, income growth has bee... | 959 |
fomc | 2,006 | President Plosser. | 5 |
fomc | 2,006 | Thank you, Mr. Chairman. Our regional economic story is similar to that of the national economy. Regional activity has slowed in the third quarter, mainly because of the housing sector. In general, our business contacts expect the regional economy to continue to expand, albeit at a modest pace. Price pressures remain e... | 1,623 |
fomc | 2,006 | Thank you. President Pianalto. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. For a while now, I've been somewhat more pessimistic than most of the Committee about the downside risk to the real economy. I was beginning to get worried that this might be the perpetual disposition of someone from Ohio. [Laughter] As a prominent member of our business community said to me no... | 644 |
fomc | 2,006 | Thank you. President Hoenig. | 7 |
fomc | 2,006 | Mr. Chairman, I'll start with the District this time, and I will tell you that conditions in the District remain generally good. Energy activity remains strong, both in the traditional sectors, such as gas, oil, and coal, and in our new sector called ethanol. [Laughter] They are booming, I'm afraid. Despite the recent ... | 980 |
fomc | 2,006 | Thank you. First Vice President Barron. | 9 |
fomc | 2,006 | Thank you, Mr. Chairman. Data releases and reports we have gathered over the intermeeting period do not indicate much change since the Committee last met, so far as the Sixth District is concerned. Overall growth has been moderate, with the index of District economic activity showing a year-over-year increase of about ... | 707 |
fomc | 2,006 | That reminds me of the Navy saying: "If it stands still, paint it. If it moves, salute it." [Laughter] President Fisher. | 31 |
fomc | 2,006 | Mr. Chairman, at our last meeting I engaged in a little Texas brag. I mentioned that the employment growth rate in our District was twice that of the national average. Then I read in the pre-briefing for the Board last night the penultimate sentence, which had a wonderful three-word phrase--"Humility is required." So l... | 1,596 |
fomc | 2,006 | President Hoenig. | 4 |
fomc | 2,006 | Richard, clarify for me. You said that some of your national contacts were seeing a slowdown in the book of business. Is that the minority of the contacts? I'm not quite sure I know what you were conveying. | 43 |
fomc | 2,006 | The question that I put to each contact was to compare the third quarter with the second quarter. I was trying to get a feel because I'm quite concerned about our staff analysis and the Greenbook's analysis of the dramatic slowdown to 1 percent in third-quarter growth. So the answer is, yes, there is a slowdown, but it... | 95 |
fomc | 2,006 | As to your reference to the trucking company--one of our trucking company contacts indicated that business is still good. Their bookings out have been reduced from three weeks to about four or five days. So they've seen a slowdown, but they're still busy. They still have business coming in. | 56 |
fomc | 2,006 | Part of that, by the way, is in the average fleet of, say, Class A trucks, which are the big ones. The average fleet age is now fourteen months; the normal fleet age is twenty-two months. Part of that has to do with all of these Environmental Protection Agency changes that keep being mandated. So you have to sort out t... | 113 |
fomc | 2,006 | I agree. Thank you. | 6 |
fomc | 2,006 | President Minehan, did you have something? | 9 |
fomc | 2,006 | Yes. I just wanted to add something that I forgot to mention earlier. President Fisher's comments reminded me of it. Whether you look at the KMV data on expected-default frequencies for the five major homebuilders or at the Dow Jones home construction index and the stock prices for the top five homebuilders, none of th... | 177 |
fomc | 2,006 | President Fisher. | 3 |
fomc | 2,006 | Mr. Chairman, very quickly--I asked two of the big homebuilders to whom I spoke about that very phenomenon. Their answer was very interesting. They have strong balance sheets. One of them said, "I can feel the private equity shark swimming around my feet." In fact, there is rumor of one sizable deal that has been propo... | 110 |
fomc | 2,006 | Private equity interest, yes. But not all five of them, and they all point in the same direction. | 22 |
fomc | 2,006 | President Stern. | 3 |
fomc | 2,006 | Thank you, Mr. Chairman. We had a meeting at the Bank last week with representatives from the housing industry in the Twin Cities, including builders, brokers, and lenders, and most of these participants operate nationally. In fact, one of the first you mentioned, Richard, was there. Some of these firms are in nonresid... | 423 |
fomc | 2,006 | Thank you. President Poole. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. Let me start by saying that I think the Greenbook outlook is a very good central tendency outlook. I am going to make some comments that are more on the downside of that, which come from hunches and gut instinct. I want to emphasize that I don't want to make policy on the basis of gut instinct,... | 1,258 |
fomc | 2,006 | Thank you. President Yellen. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. Five weeks have passed since our last FOMC meeting, and not surprisingly the outlook does not appear to have changed in any fundamental way. Recent data bearing on the near-term situation point to noticeably slower growth in the third quarter than we anticipated at our last meeting. However, th... | 1,371 |
fomc | 2,006 | Thank you. It's just a little after 4:00. Why don't we take a coffee break and come back at 4:20? | 29 |
fomc | 2,006 | Mr. Stockton. | 4 |
fomc | 2,006 | It's amazing how great my answers are to your questions at 3 o'clock in the morning after an FOMC meeting. [Laughter] I want to address just a couple of things that came up during the question-and-answer session. First, on the issue that President Yellen raised about the expectational channel. That's a pretty small pie... | 456 |
fomc | 2,006 | Thank you. President Lacker. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. The Fifth District survey for October just released today shows manufacturing flattening out after a run-up last month, though expectations remain upbeat. Services firms note solid increases in revenues, and overall District job growth remains strong. Among retailers, big-ticket sales were soft... | 1,017 |
fomc | 2,006 | Thank you. Vice Chairman Geithner. | 9 |
fomc | 2,006 | Thank you, Mr. Chairman. Our view of the national outlook hasn't changed much since September. If monetary policy follows the path that's laid out in the Greenbook, and it's flat for the next few quarters, then we expect growth to return to a level close to 3 percent in '07 and for inflation to moderate gradually from ... | 636 |
fomc | 2,006 | Thank you. Governor Kohn | 6 |
fomc | 2,006 | Thank you, Mr. Chairman. The Committee's focus has been on encouraging a gradual abatement of core inflation, and I think the limited evidence we've gotten since the last meeting is consistent with this outcome. The price data themselves show some signs of deceleration of core inflation on a three-month basis from the ... | 739 |
fomc | 2,006 | Thank you. Governor Bies. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. Well, again, as some of you have said, in five weeks we don't have a whole lot of new information. But I'm coming back and starting with housing again. As you know, that continues to be something I watch. Let me just make a few comments and give you recent feedback from some exams and dialogues... | 1,022 |
fomc | 2,006 | Thank you. Governor Warsh. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. My own views are quite consistent with what I expressed five weeks ago and with the central tendency of many of the speakers today--that is, a greater concern about inflation prospects than growth prospects. So I thought what I'd do is just give you maybe three or four perspectives on market ac... | 1,035 |
fomc | 2,006 | I second the motion. [Laughter] | 9 |
fomc | 2,006 | What does all of this mean for the real economy? Again, I'd break it up into two pieces. First, in terms of a consumer reaction function, I think consumers are going to be very stubborn and very strong and are not going to be overly scared by a third-quarter GDP number that they don't really pay that much attention to.... | 725 |
fomc | 2,006 | Thank you. Governor Kroszner. | 9 |
fomc | 2,006 | Thank you, Mr. Chairman. I'd actually like to start with a plea based on something that President Fisher said. I'd like to be treated like a welder. Can I get a show-up bonus? [Laughter] | 45 |
fomc | 2,006 | Then we'll be waiting for a completion bonus. [Laughter] | 13 |
fomc | 2,006 | As everyone has said, there has been relatively little information to change people's outlook fundamentally. We have the same sort of tension that we've had before--slowing growth but persistent inflation. Although we see some signs that inflation is coming down, it is still persisting at a higher level than many peopl... | 1,157 |
fomc | 2,006 | Governor Mishkin. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. As I see it, the data have actually been coming in very much along the lines of where we were at the last meeting in terms of the outlook. The only way that I would change my view slightly is actually good news, in that I see somewhat less downside potential than I saw at the last meeting. In p... | 482 |
fomc | 2,006 | Thank you. Let me summarize what I heard, and then I would like to make a few comments of my own. There were several themes around the table. Many people noted the bimodal economy. Housing is still quite weak, although a number of people noted that they thought the lower tail had been trimmed somewhat. Autos are underg... | 2,439 |
fomc | 2,006 | Mr. Chairman, I was going to make a suggestion. I don't know whether there is general assent to this. It seems to me it would be helpful, before our December meeting, to have a better read on the vulnerability of the housing firms to bankruptcy. I can imagine a lot of defaults there, causing us some concern or a lot of... | 163 |
fomc | 2,006 | I would ask the people around the table, in their conversations in their Districts in particular, to talk to medium-sized homebuilders. We've had the large homebuilders at the Board, and we have considerable contact with them; but what we don't have is contact with the medium-sized homebuilders. | 59 |
fomc | 2,006 | Right. My understanding is that the large ones are in pretty good shape. | 15 |
fomc | 2,006 | Okay. Let me ask the Committee's preference here. The reception tonight starts at 5:45, followed by dinner half an hour later. We can adjourn now, or Vince is prepared to give his opening remarks on the policy session, which would allow us to finish earlier tomorrow. We'll do the go-round tomorrow, of course. Jeff? | 70 |
fomc | 2,006 | Let's adjourn now. | 5 |
fomc | 2,006 | Okay. How many people would like to adjourn now? | 12 |
fomc | 2,006 | Half the class. [Laughter] | 8 |
fomc | 2,006 | Is President Lacker allowed to dissent on that? [Laughter] | 14 |
fomc | 2,006 | Nothing personal, Vince. | 5 |
fomc | 2,006 | We'll probably remember it between tonight and tomorrow, Vince. | 11 |
fomc | 2,006 | All right. Do I take it, then, that we would like to hear Vincent's presentation? SEVERAL. Yes. | 26 |
fomc | 2,006 | All right. Vincent, whenever you're ready. | 9 |
fomc | 2,006 | 2 Thank you, Mr. Chairman. The pulse of the market regarding your policy action today is the flat line in the top panel of your first exhibit. [Laughter] Not weakish data releases early in the period, nor stronger ones later, nor speeches by some of you interpreted as hawkish shook the belief that the intended federal ... | 1,732 |
fomc | 2,006 | Thank you. Are there any questions for Vince? President Moskow. | 14 |
fomc | 2,006 | Vince, I want to ask you about charts 5 and 6 in the Bluebook. Also, I want to make a comment and then ask a question. Chart 5, the equilibrium real federal funds rate chart, shows that the current fed funds rate is slightly above the range of models that close the output gap within twelve quarters. It doesn't really s... | 242 |
fomc | 2,006 | You're exactly right, and that's why we tried to put them closer together in this Bluebook. [Laughter] | 23 |
fomc | 2,006 | So we're making progress. | 5 |
fomc | 2,006 | We're making progress--incremental, as all progress at the Federal Reserve is. [Laughter] The notion of the equilibrium real rate is: if you held the real rate constant for the next twelve quarters, the output gap would close at the end of that period. That doesn't, however, mean that you would like the inflation rate ... | 208 |
fomc | 2,006 | Well, I know they don't change very much, but I still think it's helpful to have them side by side as we look at them. | 28 |
fomc | 2,006 | Vice Chairman Geithner. | 6 |
fomc | 2,006 | I think I'm echoing Michael, but I want to compliment the staff on the evolution of the Bluebook. I think that seeing that complement of prisms on different policy choices or different paths is useful, and we should see them all the time and more of them. I sort of missed the inclusion of the range of ones we saw in Ju... | 219 |
fomc | 2,006 | Let me make two points, Mr. Vice Chairman. First, a good measure of the compliment should be directed to Dave and his staff as well because these model simulations really do take a lot of effort on the part of the folks in the MAQS Section in Research and Statistics. Second, in the box in the Bluebook we tried to take ... | 290 |
fomc | 2,006 | If you think about the extension of the staff forecast--basically, if you look at beyond the 2008 period--it's easy to see how you get back to 2 percent. Beyond that, I guess our underlying assumption would be that you will have to get inflation expectations down if you want to have inflation below 2 percent over that ... | 168 |
fomc | 2,006 | Other questions? President Minehan. | 7 |
fomc | 2,006 | Just to follow up on that, when we were experiencing rates of PCE and CPI core inflation below 2 percent and there was considerable concern about the level of disinflation, what were market expectations saying about inflation at that time? What were measures of inflation expectations saying? My sense is that the profes... | 91 |
fomc | 2,006 | Basically, it looks as though the five-year inflation compensation five years ahead was running around 2 percent and even then fluctuating. It's a little harder the further you reach back, so I don't know about the liquidity premiums and all the various ways in which you would extract that. It has fluctuated but doesn'... | 106 |
fomc | 2,006 | It kind of begs the question then, doesn't it, about what level of low, stable inflation is the right level of low, stable inflation? [Laughter] | 33 |
fomc | 2,006 | That comes tomorrow. [Laughter] | 8 |
fomc | 2,006 | That's why I pose the question right now. | 9 |
fomc | 2,006 | What a lead-in. | 5 |
fomc | 2,006 | I mean, we don't have to answer it. I don't think anybody has an answer to it, but we've been through a whole cycle here, and inflation expectations are not telling a totally different story, even through the whole cycle. | 46 |
fomc | 2,006 | The ten-year TIPS came down quite a bit during the deflation scare. | 16 |
fomc | 2,006 | You do see fluctuations over the past five or six years. It looks relatively trendless after that. | 20 |
fomc | 2,006 | Are there other questions for Vince? We'll reassemble tomorrow at 9:00 a.m. | 19 |
fomc | 2,006 | Good morning. We've already heard Vincent's report on the statement and policy proposals, so we'll begin the program this morning with the policy go-round. After that, we'll have our discussion on communications. We'll adjourn at that point. For those of you who can stay for lunch, we have a short presentation on plann... | 105 |
fomc | 2,006 | Thank you, Mr. Chairman. Let me start with my policy conclusion and then explain how I got there. First of all, I support holding the federal funds rate at the current level of 51/4, and I also support minimal change in the statement because I think that not much has happened and any change that we put in place is only... | 1,044 |
fomc | 2,006 | Thank you. Yes, two-handed intervention. | 9 |
fomc | 2,006 | Bill, I'm not sure this is quite the way to ask the question, but if the Committee adopted that approach and if the market's response to that change in the signal were to lower the expected funds rate path because of the way they interpret the change in the signal, would that be consistent with the objectives you're tr... | 66 |
fomc | 2,006 | I think so, yes. | 6 |
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