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fomc | 2,006 | So that would leave you with a forecast for inflation that you'd be comfortable with? | 16 |
fomc | 2,006 | Right. My view of the recent news on inflation is that it has been marginally better, that it is tilted a bit in the right direction. I think that's the view that the Chairman expressed yesterday, and that has certainly been my view. But we should want the market to respond to incoming data in a way that it would be ve... | 146 |
fomc | 2,006 | I wasn't trying to talk you out of your view, [laughter] but don't the policy rules, as a prism on these choices, tell you that, if you alter your weights on your loss function-- | 42 |
fomc | 2,006 | No, no. The loss function should reflect our fundamental beliefs about our objectives and what we're trying to accomplish. You need to keep the loss function analytically distinct from your judgment about the way the economy works and the stance of the economy. Our preferences ought not to blow in the wind. | 58 |
fomc | 2,006 | This is really just a question about the framework the policy rules give us for this choice. The way I understood this is that, if you alter the weights and you're asymmetric in your weights, in your policy rules, but you're talking about a forecast that's sort of the basic central forecast underpinning your rules, don... | 68 |
fomc | 2,006 | But there's a distinction. What I wanted to say was that my weights are asymmetric, they have been asymmetric, and I expect them to continue to be asymmetric. The exercise that we had in the Bluebook and in the presentation yesterday is to suppose that your weights are different from my weights--not that we alter our w... | 89 |
fomc | 2,006 | I agree with you on that. | 7 |
fomc | 2,006 | President Fisher. | 3 |
fomc | 2,006 | I was just listening to Bill, and I consider us neither hawks nor sparrows nor doves. I hope that we're being owlish, and that was a very owlish approach. But I'd like to come around to what Bill said, maybe in a different way. It struck me, Mr. Chairman, when I reflected last night on what I heard at the table yesterd... | 386 |
fomc | 2,006 | What do you want to substitute? [Laughter] | 11 |
fomc | 2,006 | He's increasingly addled, but his words do carry weight. In his recent client letter, he says, "Inflation is leveling off at admittedly unacceptable levels." Hence my careful reference to the word "comportment." I think first about the immediate statement, and I want to come to that. I also think, by the way, of one th... | 613 |
fomc | 2,006 | President Poole. | 4 |
fomc | 2,006 | I have a question for Richard. When you said that inflation risks are tilted to the upside--I think you said something like that--did you mean that you believe the incoming data will likely show higher inflation, or did you mean that your utility function or policy objective function puts a high weight on inflation? I ... | 71 |
fomc | 2,006 | Like you, I feel that we have some moderate but still substantial inflationary impulses. What I'm concerned about is expectations. | 24 |
fomc | 2,006 | But I want to pin you down on that because I think it's an important point. Do you believe that the probability is higher that inflation will come in higher than it has been or lower than it has been? | 42 |
fomc | 2,006 | Do you want me to answer the question? | 9 |
fomc | 2,006 | I'm just trying to make the question sharp. To me, the outlook for the inflation data that we're going to see is pretty symmetrical around where we have been, maybe even tilted a little to the downside. | 41 |
fomc | 2,006 | Yes, I do think we've had a moderation of inflation; however, I don't think it has come down to a level that we should be proud of. | 31 |
fomc | 2,006 | Then I agree with that. | 6 |
fomc | 2,006 | I do worry that, if we don't get it down to a level that we should be proud of, we will feed expectations that we don't have the backbone to deal with what the market expects us to deal with, which should, in my view, be our single purpose. | 55 |
fomc | 2,006 | The rate that we would be proud of is really a way of stating the objective or loss function. Okay. Thank you. Thank you, Mr. Chairman. | 32 |
fomc | 2,006 | Governor Kohn. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. I support keeping rates unchanged and alternative B. I think that rate, at least for now, seems consistent with growth of the economy just a tad below the growth of its potential and a gradual decline in inflation. Incoming data will tell us if we're wrong on that, but right now that looks like... | 1,041 |
fomc | 2,006 | President Moskow. | 4 |
fomc | 2,006 | Could you just repeat the change you suggested, Don, in section 2? | 16 |
fomc | 2,006 | Instead of "economic growth appears to have slowed further in the third quarter" it would just be "economic growth has slowed over the course of the year." | 31 |
fomc | 2,006 | Vice Chairman Geithner. | 6 |
fomc | 2,006 | This is a glossary or dictionary question. Like Don, I interpreted "moderate," because I was advised by the staff to do so, as "at or slightly below potential." Have we used that phrase in the recent past in a way that would allow the reasonably informed outside person to interpret it that way? | 62 |
fomc | 2,006 | I don't know. | 4 |
fomc | 2,006 | We've used it as a verb and not as an adjective. [Laughter] | 16 |
fomc | 2,006 | What is our euphemism for "potential"? Is it "solid"? Is "solid" the conventional use? | 23 |
fomc | 2,006 | It's sustainable or solid. I really hate to have to say this. [Laughter] We have been using "solid" as "at or above potential," and it seems symmetrical to use "moderate" as "at or below potential." | 49 |
fomc | 2,006 | If we consider the merits of Don's change, or the Kroszner-Kohn change, to that second section, does it convey the sense of growth? If you look through the recent slowdown, growth strengthens relative to the pace in the second and third quarters. Does "moderate" imply some modest strengthening relative to the pace of t... | 74 |
fomc | 2,006 | I think the issue is whether "going forward" means starting from the quarter we're currently in or whether it is a statement about 2007. The reason we drafted the explicit reference to the third quarter is that we're in the fourth quarter, and at least if you believe the staff forecast, you think GDP growth has already... | 71 |
fomc | 2,006 | Moderately? [Laughter] | 7 |
fomc | 2,006 | President Minehan. | 4 |
fomc | 2,006 | I was just going to say, too, that all of this is complicated by the fact that our assessment of potential has been written down. Even an informed observer might not have caught that nuance of how much we've written it down. Looking at what would have been referred to in a "moderate" or "solid" context, the numbers wer... | 133 |
fomc | 2,006 | I would say, President Minehan, that the reference in the minutes of the past two meetings to the staff's marking down the rate of growth of potential has certainly caught the attention of market participants. | 40 |
fomc | 2,006 | Do you think it has caught enough attention that they would still interpret a fourth-quarter growth rate of 21/2 percent or so as okay? | 29 |
fomc | 2,006 | I think, actually, that the chart I had in my briefing that showed the nine primary dealers' forecast of real GDP tracking above the Greenbook forecast suggests that they may have moved it down but they haven't moved it down as much as the staff. | 50 |
fomc | 2,006 | Okay. | 2 |
fomc | 2,006 | President Lacker. | 4 |
fomc | 2,006 | Governor Kohn, concerning the assessment of risk, I think I heard you say about alternative B+ that you weren't sure what effect it would have. I'm interested in what underlies that uncertainty. | 39 |
fomc | 2,006 | Well, my basic concern here is that we have something already that people seem to understand. Why change it? In my view, the current risk assessment is well understood, thanks to the minutes. Things haven't changed. As everybody stressed in their discussions of the economy yesterday and their sense of the risk to the o... | 78 |
fomc | 2,006 | I understand those rationales for retaining language, but you expressed uncertainty about what the effect of B+ was. It struck me--and I think was intended by Vince--as adding a dollop of hawkishness to the statement. Do you doubt that the markets would interpret it that way? | 59 |
fomc | 2,006 | I think that's quite possible. Given that people haven't changed their views, I'm not sure why we would necessarily want to do that. | 26 |
fomc | 2,006 | All right. President Minehan. | 7 |
fomc | 2,006 | As I noted yesterday, I've become somewhat less worried about the downside risk to the baseline outlook. So to some degree, that factor has changed a little since the last time. In fact, I think the baseline isn't bad at all. Indeed, it's a testament, again, to the resilience of the U.S. economy if we can actually pull... | 927 |
fomc | 2,006 | President Plosser. | 5 |
fomc | 2,006 | Thank you, Mr. Chairman. There has been a lot of interesting discussion so far in this go-round, and I find my own views refining a bit as we go along. The bottom line today is that certainly I agree with everyone who has spoken so far that to maintain the funds rate at 51/4 percent is the appropriate action. The incom... | 127 |
fomc | 2,006 | Beginner's luck. | 5 |
fomc | 2,006 | That's right. [Laughter] Well, you've got to take it when you can, right? Inflation continues to be higher than I'd like to see, and I still believe there are larger risks on the inflation side than on the growth side. Growth will be slower in the third quarter--we have all acknowledged that. But we also discussed arou... | 877 |
fomc | 2,006 | Thank you. President Hoenig. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. My preference also is to maintain the rate at 51/4 percent. For the near-term outlook, I think an important recent development that has been noted is the decline in energy prices. As I said yesterday, lower energy prices do help cushion the effects of the housing slowdown, and they do reduce th... | 434 |
fomc | 2,006 | Did you mean to say that you wanted to strike the words in the inflation section? Was that what you were saying? | 24 |
fomc | 2,006 | Yes. | 2 |
fomc | 2,006 | Okay. Thank you. | 5 |
fomc | 2,006 | Thank you. | 3 |
fomc | 2,006 | You said you didn't like the word "moderate"? | 11 |
fomc | 2,006 | No, I said I am very comfortable with the word "moderate." | 15 |
fomc | 2,006 | Oh, comfortable with it. I'm sorry. | 9 |
fomc | 2,006 | President Pianalto. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. As I noted yesterday, I'm more comfortable than I was at our last meeting that economic growth will not deteriorate significantly, and I continue to believe that the risk that inflation will remain higher than I personally desire is still there. So today I support no change in the fed funds rat... | 319 |
fomc | 2,006 | President Yellen. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. I support keeping rates unchanged. On the wording, I guess I lean slightly toward B+ over B, but it's not a matter that I feel strongly about, and I could certainly accept either alternative. I remain quite uncertain about how the various forces in the economy are going to play out. As I said i... | 487 |
fomc | 2,006 | Thank you. First Vice President Barron. | 9 |
fomc | 2,006 | Thank you, Mr. Chairman. The bottom line is that I'm comfortable with the current policy stance and see no need to move until we become convinced that our forecast for inflation moderation won't be realized. As for the wording, I'm supportive of alternative B as currently provided in the Bluebook. While I'm attracted t... | 330 |
fomc | 2,006 | Thank you. President Moskow. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. Given our decision to pause a couple of meetings ago, I don't think that we should move rates today. We've made only small changes to the outlook since our last meeting, and we're still facing an uncertain policy environment. I'm feeling a bit more comfortable about the resilience of the real e... | 444 |
fomc | 2,006 | Professor. | 2 |
fomc | 2,006 | Professor. [Laughter] Professor Geithner did, saying, "what's the dictionary say?" They're going to be rushing to the dictionary to figure out what "moderate" really means here. So there's confusion about the definition. Then there's the confusion that was pointed out about what the baseline is--from where; from the th... | 244 |
fomc | 2,006 | President Plosser. | 5 |
fomc | 2,006 | There's more discussion about the word "moderate." It occurs to me this arises also in other contexts. Do we really have to speak in code words? If what we mean by "moderate" is that we believe growth will be near trend or near potential going forward, why don't we just say that? It's just a suggestion. | 67 |
fomc | 2,006 | That would break many years of tradition. [Laughter] | 12 |
fomc | 2,006 | Just say "slightly" or "somewhat moderate." | 12 |
fomc | 2,006 | That's okay, President Plosser. You're new. [Laughter] | 15 |
fomc | 2,006 | I'm a bit of a slow learner, but I'll catch on. | 13 |
fomc | 2,006 | I see a two-handed intervention from President Poole. | 11 |
fomc | 2,006 | As he was speaking, I started to write exactly, "Couldn't we just say the economy seems likely to expand at a pace at or slightly below potential?" That's what we're all saying we mean. Why not say it? | 44 |
fomc | 2,006 | So long as we don't get sidetracked onto what "potential" is at this point. | 19 |
fomc | 2,006 | Why don't we say, "Whatever that is"? [Laughter] | 14 |
fomc | 2,006 | You fill in the blank. | 6 |
fomc | 2,006 | Good suggestion. | 3 |
fomc | 2,006 | This is going to come up later. There are real issues about using the word "potential" that I think will get us into trouble. So I'm sympathetic to your view about being clear, but I think we had better wait on this. It's something that's more complicated than I think we want to deal with at this stage. | 65 |
fomc | 2,006 | All right. President Stern. | 6 |
fomc | 2,006 | Thank you, Mr. Chairman. First of all, I support maintaining the federal funds rate at 51/4 percent. Second, I have some concerns about editing on the fly. I'm not sure it leads to effective communication, but since that's the game we're playing, [laughter] I will enter into it, albeit a little reluctantly. With regard... | 438 |
fomc | 2,006 | I think the communications subcommittee should take that under advisement. [Laughter] | 17 |
fomc | 2,006 | Good idea. [Laughter] | 7 |
fomc | 2,006 | Governor Bies. | 4 |
fomc | 2,006 | Thank you, Mr. Chairman. First, I support leaving the fed funds rate unchanged at this meeting. I've puzzled over section 2, and I like what Governor Kohn has suggested because one of the challenges I have had in this whole thing is what I heard around the table yesterday, which in general supports the conclusion I've ... | 454 |
fomc | 2,006 | President Lacker. | 4 |
fomc | 2,006 | Many of us have said that inflation is too high. Many of us have said it recently in public, and I haven't heard any of us say that we're satisfied with inflation being 21/4 percent indefinitely. But public expectations clearly seem inconsistent with core inflation returning to below 2 percent in a reasonable amount of... | 627 |
fomc | 2,006 | Thank you. Governor Kroszner. | 9 |
fomc | 2,006 | I support no change at this time. As many people have said, we've had very little new information to change our views from the last meeting, and I think that the position that we're in is consistent with growth a tad under trend potential, whatever word we might want to use. I share Rick's caution about being too expli... | 1,121 |
fomc | 2,006 | Thank you. Governor Warsh. | 7 |
fomc | 2,006 | Thank you, Mr. Chairman. I support keeping the federal funds target constant. Let me enter the fray about language by stating the opinion that we should change language if we think the markets do not understand our views. We shouldn't change language just because the market disagrees with our views. So regarding the di... | 812 |
fomc | 2,006 | Thank you. Governor Mishkin. | 7 |
fomc | 2,006 | I see the data that have come in over the past five weeks as indicating that the economy is actually evolving in a way that I find quite attractive. In that sense I hate to use this language, but I think it's actually appropriate: I think the right language is "stay the course." [Laughter] In that regard, in terms of t... | 148 |
fomc | 2,006 | Thank you. Vice Chairman Geithner. | 9 |
fomc | 2,006 | I am, as I think the center of gravity in this Committee is, somewhat uncomfortable with the amount of moderation that the Greenbook expects to see in core PCE inflation, and I'm somewhat uncomfortable with the view that, with the markets' expectations for the fed funds rate, we're going to see enough moderation of inf... | 576 |
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