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fomc | 2,007 | I notice that they're not playing in the Seventh Federal Reserve District, though. [Laughter] | 19 |
fomc | 2,007 | Some day we'll have the Super Bowl at the Seventh Federal Reserve District. But turning to the business at hand, business activity in our District continues to expand at a somewhat modest pace, but the tone of my business contacts was more positive than at our last meeting. Manufacturing activity in the District is cur... | 1,009 |
fomc | 2,007 | Thank you. President Stern. | 6 |
fomc | 2,007 | Thank you, Mr. Chairman. Trends evident in the District economy for some time fundamentally are continuing. Specifically, employment is increasing moderately and steadily. Most components of aggregate demand are expanding, and I would note, in particular, strength in nonresidential construction. There has been no signi... | 510 |
fomc | 2,007 | Thank you. President Minehan. | 7 |
fomc | 2,007 | Thank you very much, Mr. Chairman. The New England regional economy continues to grow at a moderate pace with relatively slow job growth, low unemployment, and moderating measured price trends. Consumer and business confidence is solid, and while retail contacts reported an uneven holiday season, manufacturers were gen... | 1,267 |
fomc | 2,007 | Thank you. President Minehan, just to clarify, I think that the forecast of consumption is not based on the idea that the saving rate has to rise. Rather, consumption is modeled using underlying determinants, like income and wealth, and an endogenous indication of that is that saving rises. | 57 |
fomc | 2,007 | Right. | 2 |
fomc | 2,007 | Anyway, you gave the impression that higher saving was itself something that was going to happen naturally. | 19 |
fomc | 2,007 | As I look at the forecast in the Greenbook, the higher saving rate--money out of income that's expected to be there going into savings--is one element that makes consumption lower than it would otherwise be. | 42 |
fomc | 2,007 | But the saving rate is not driving the consumption forecast. Rather, the consumption forecast is driving the saving rate. | 22 |
fomc | 2,007 | In the forecast, yes. | 6 |
fomc | 2,007 | President Fisher. | 3 |
fomc | 2,007 | Well, Mr. Chairman, first on our cheaper, more affordable, and perhaps luckier Eleventh District economy, we estimate that employment growth ran at a rate slightly greater than 3.2 percent last year and our output growth exceeded 4 percent. We do see some possible slowing, but there is still very strong momentum in the... | 807 |
fomc | 2,007 | The one with two teams from the Seventh District. [Laughter] | 14 |
fomc | 2,007 | Yes. But here are some data to put this statement in perspective. The contact from the largest company reports that cancellation rates, which were running at 50 percent in their most stressed markets, particularly in California and Florida, have come back to 20 to 25 percent--relatively good news. One aspect worth noti... | 1,508 |
fomc | 2,007 | President Fisher, just a quick question. I couldn't quite gather whether you were saying that commercial construction is overall slowing. You mentioned that once, but then you talked about a variety of projects. | 38 |
fomc | 2,007 | It appears to be slowing in certain areas and in our District but is nonetheless running at a stout rate. It seems to have come off somewhat but, given the large projects that are planned, the numbers work out to show increasing pressure on the labor that's available to construct those projects. | 56 |
fomc | 2,007 | Thank you. President Pianalto. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I have the sense that since our last meeting we've received a wealth of data but not necessarily a wealth of information. Between the data that have come in and the conversations that I've had with my District contacts in the past six weeks, I'm a little more confident about the outlook for rea... | 911 |
fomc | 2,007 | Thank you. President Lacker. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. Economic activity in our District lost a bit of momentum in January. Retail sales contracted in recent weeks as automobile dealers noted waning interest and buyers of big-ticket electronic goods stayed home, perhaps to watch the big screens they purchased during the holidays. [Laughter] Another... | 944 |
fomc | 2,007 | Thank you. President Plosser. | 8 |
fomc | 2,007 | Thank you, Mr. Chairman. Conditions in the Third District have continued to evolve much as they have for most of the past several months. Economic activity is still expanding. I think I can use the word "moderate"--I don't think anybody else has used that yet, and our contacts expect the pace to be maintained in the co... | 1,285 |
fomc | 2,007 | Mr. Vice Chairman. | 5 |
fomc | 2,007 | Charlie, I'm not sure I understand your thinking. You said that you expect what sounded like a pretty significant moderation in core PCE, but that's on a monetary policy assumption that implies further tightening. | 39 |
fomc | 2,007 | That's right, somewhat tighter, somewhat more aggressive than what's in the Greenbook. | 16 |
fomc | 2,007 | Though I don't want to pin you down, that sounds sort of modest. You are saying that with another 25 basis points you'd get what core PCE inflation over the forecast period? | 37 |
fomc | 2,007 | The path I was thinking about as I was doing the forecast and trying to determine the appropriate policy here--my desire is to get inflation down lower, and that's reflected in my forecast--is one in which the fed funds rate goes up somewhat from where it is today, perhaps to 51/2 or 53/4 percent. But then by the end o... | 106 |
fomc | 2,007 | Just in orders of magnitude--if we did another 25 or 50 basis points and there were some sort of associated changes in overall financial conditions so that that was reinforced, you'd get a core PCE inflation forecast that would go how far down? Would it go to 1.5? | 59 |
fomc | 2,007 | Well, there's some uncertainty about that. I think it would get to between 1.5 and 2 percent. | 24 |
fomc | 2,007 | Thank you. It's 4:30. Why don't we take a fifteen-minute coffee break? | 19 |
fomc | 2,007 | Would you come to order, please? Thank you. We are ready to recommence with the go-round. President Hoenig. | 26 |
fomc | 2,007 | Thank you, Mr. Chairman, now that I have everyone's attention, [laughter] I'm going to start with some information on the District and then talk briefly about the national economy from my perspective. Let me begin by saying that the District's activity did slow over the second half of 2006 in line with the national eco... | 783 |
fomc | 2,007 | Thank you. President Barron. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I thought I'd focus a little more today in my comments on the State of Florida as it relates to the housing sector. We've heard a lot more positive comments in just the past few minutes about housing. So let me offer a contrarian view, if you will. Florida accounts for about 41 percent of our D... | 949 |
fomc | 2,007 | President Poole. | 4 |
fomc | 2,007 | Thank you, Mr. Chairman. I have to start by saying that it's hard to compete with my colleague Richard Fisher, with his stable of contacts. I have perhaps just a slight amendment on Wal-Mart. My contact there said that he has observed in recent years a changing pattern of holiday shopping, with shoppers procrastinating... | 832 |
fomc | 2,007 | Thank you. | 3 |
fomc | 2,007 | Mr. Chairman? | 4 |
fomc | 2,007 | President Lacker. | 4 |
fomc | 2,007 | Do you think that's because they have changed their minds about our reaction function or about how the shocks are likely to come in between now and then? | 29 |
fomc | 2,007 | I suspect that it's a combination. But I also think that a number of us in our speeches have been saying things such as that we think policy is at about the right place. If we repeat that often enough, the markets begin to think that we're not about to cut rates. | 56 |
fomc | 2,007 | So what about our statement in October? Did they miss that? | 13 |
fomc | 2,007 | I guess that it's a consequence of the interaction between what we've been saying and the flow of data. You have to be careful about double-counting here, but the flow of data has perhaps convinced the market that what we were saying is right because the market, I think, had developed a somewhat different sense of wher... | 75 |
fomc | 2,007 | Does Mr. Lacker have an alternative explanation? | 10 |
fomc | 2,007 | I think he's right. He is suggesting that his belief is that the reaction function they hold to hasn't changed much in the past month or two but that the shocks have come in more consistent with our assessment of how they were going to come in. Is that fair? | 53 |
fomc | 2,007 | Yes. | 2 |
fomc | 2,007 | Thank you. Vice Chairman Geithner. | 9 |
fomc | 2,007 | Thank you, Mr. Chairman. Just a few quick points. We feel somewhat better about the outlook for growth and inflation, but we haven't really changed our forecasts for '07 and '08. So just as we expected over the past few cycles, we currently expect GDP to grow roughly at the rate of potential over the forecast period, w... | 1,040 |
fomc | 2,007 | Thank you. Governor Kohn. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. In preparation for submitting my forecast, I looked at my previous forecasts--a humbling but instructive experience usually. [Laughter] Going back a year, I found that, based on the staff's estimate for 2006, inflation and growth had each turned out within a quarter point of my projections. I'm... | 1,417 |
fomc | 2,007 | Thank you. Governor Bies. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. Like several of you, I'm going to focus on housing and what we're seeing in the banking sector and in mortgage performance. Since the last meeting, I am feeling better about the housing market in the aggregate. It looks as though home sales are stabilizing for the fourth quarter. On the whole, ... | 1,132 |
fomc | 2,007 | Thank you. Governor Warsh. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I thought I'd provide just a couple of perspectives, first on the 2006 economy and then, by extrapolation, on the trends in '07. With respect to 2006, I think the economy outperformed market expectations and Greenbook expectations, for probably at least four reasons. The first is the underlying... | 1,951 |
fomc | 2,007 | Thank you. Governor Kroszner. | 9 |
fomc | 2,007 | Thank you very much. Well, the data have come in so far according to plan, and you can thank Chairman Bernanke for doing that. I think he has some special relations with the BEA and others. [Laughter] Exactly as we had hoped they would and said they would, the data show moderation in growth with a prospect for accelera... | 939 |
fomc | 2,007 | Thank you. Governor Mishkin. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. Well, I'm last in this line, and I'll try to be brief so that we can get to dinner soon. I do see signs of stabilization in the housing market, and the way to think of it in terms of spillovers is that we do expect some spillovers through the natural effect of weaker housing on aggregate demand... | 498 |
fomc | 2,007 | Thank you. This was an exceptionally interesting, useful discussion. I thought I would try to summarize what I heard around the table. If you have comments on that, please give them to me, and then I'll add a few comments of my own. Members noted considerable economic strength during the intermeeting period. Labor mark... | 2,102 |
fomc | 2,007 | We have two important pieces of information coming in at 8:30 tomorrow morning. I hope the staff can give us a quick first read to start our meeting. I know that instant analysis is risky, but I ask for it anyway. [Laughter] | 52 |
fomc | 2,007 | And I will provide it. [Laughter]. Whether it's worth anything or not, I don't know. [Laughter] | 25 |
fomc | 2,007 | We'll start the meeting with the data. Anything else? There's a reception and dinner in Dining Room E. It's for those who wish to attend. If you have other plans, please feel free to pursue them, and we'll see you tomorrow morning at 9:00. | 54 |
fomc | 2,007 | Good morning, everyone. Let's start with asking Dave Stockton to report on this morning's data. | 19 |
fomc | 2,007 | So, Mr. Chairman, this was sort of done on the fly. Unlike the BEA, I won't be able to go back and revise these remarks. [Laughter] Total GDP this morning came in at 31/2 percent. That was 0.9 percentage point stronger than we had forecast in the Greenbook. There were really two sources of our miss in the fourth quarte... | 135 |
fomc | 2,007 | The net export numbers are based on trade data only for October-November, and we each make an estimate of what December is going to be. Perhaps half of our miss, or not quite half, was due to differences of opinion about December. Looking at what they've done for December, we will take some information from that. Some ... | 240 |
fomc | 2,007 | That's basically half of our GDP miss. The other half is on the inventory investment side. Just like with Karen, about half of our miss on inventory investment has to do with a difference of opinion about what the December book value figures will turn out to be. So it's just a difference between the BEA's estimate for ... | 280 |
fomc | 2,007 | What was the number for domestic final purchases, Dave? | 11 |
fomc | 2,007 | I actually don't know what the domestic final purchases were, but if you include the government, which they do, they were a little weaker than the number we had written down. | 35 |
fomc | 2,007 | No, the overall number. | 6 |
fomc | 2,007 | Yes, I don't know what the overall number is; I know only what the contributions are. We'll be able to get the overall number by break time. Taking on board our differences of opinion about the December figures, we'd probably be writing down, with the release in hand today, a GDP estimate for the fourth quarter of abou... | 644 |
fomc | 2,007 | Thank you. Are there any questions? If not, Vincent. | 13 |
fomc | 2,007 | 3 Thank you, Mr. Chairman. I'll be referring to the handout "Material for FOMC Briefing on Monetary Policy Alternatives." As noted in the top left panel of your first exhibit, the path of policy expectations rotated up over the intermeeting period, and investors now apparently anticipate the federal funds rate to move ... | 1,364 |
fomc | 2,007 | Thank you. Are there questions for Vincent? Vice Chairman Geithner. | 15 |
fomc | 2,007 | This is more an observation than it is a question. I guess I'm a little uncomfortable the way you framed, just in the paper, exhibit 3, in the sense that I don't think it would be great if we came to view alternative B in the statement as, in a sense, validating a higher implicit inflation objective than members of the... | 227 |
fomc | 2,007 | You probably won't have that trouble in public because among the things that will be released is your central tendency forecast and it does have a steeper decline in core PCE inflation than the staff's forecast does. So keeping policy unchanged at this meeting does not validate a 2 percent inflation goal; it just means... | 68 |
fomc | 2,007 | We're ready to begin our policy go-round. President Plosser. | 14 |
fomc | 2,007 | Thank you, Mr. Chairman. I'll start off by saying that today I favor maintaining the federal funds rate at 51/4 percent. As we discussed yesterday and we learned this morning, the picture that seems to be emerging from the latest economic information is one of reasonably strong underlying growth, which has been tempora... | 666 |
fomc | 2,007 | President Plosser, just so I'm clear, which sections from C? | 15 |
fomc | 2,007 | I advocate leaving the federal funds rate section as is but using sections 2 and 3 from alternative C as our rationale. | 25 |
fomc | 2,007 | Thank you. President Minehan. | 7 |
fomc | 2,007 | Thank you very much, Mr. Chairman. I, too, am in favor of maintaining policy at its current level. I find myself somewhere between policy alternatives C and B as described in exhibit 3, leaving out, as Vice Chairman Geithner suggested, any commitment to either of those goals. I am concerned about housing and the possib... | 712 |
fomc | 2,007 | President Minehan, for the risk assessment, in alternative C, are you proposing also the second sentence? | 21 |
fomc | 2,007 | Yes, just taking out the phrase from "and" to "easing": "The Committee judges that inflation remains a predominant concern. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information." | 51 |
fomc | 2,007 | Thank you. First Vice President Barron. | 9 |
fomc | 2,007 | Thank you, Mr. Chairman. Let me say at the outset that I was truly impressed with your summary of everyone's comments yesterday. If I had known that you were listening so intently, I might have scrutinized my own comments a little more. [Laughter] Many participants, as you summarized, reported an improved outlook in ho... | 555 |
fomc | 2,007 | Thank you. President Hoenig. | 7 |
fomc | 2,007 | Mr. Chairman, I'm very comfortable with alternative B as far as the rate goes. Given what we don't know today, I think that's exactly where we ought to be. We will know more over the next six months about how that should be adjusted as we move forward. On the language, I feel that we would be better served with section... | 202 |
fomc | 2,007 | Thank you. | 3 |
fomc | 2,007 | Mr. Chairman? | 4 |
fomc | 2,007 | Vice Chairman Geithner. | 6 |
fomc | 2,007 | May I ask a clarifying question? It's not actually clear to me, really, that alternative C, section 3--the inflation section--is more hawkish than alternative B. | 37 |
fomc | 2,007 | It's not. | 3 |
fomc | 2,007 | So you were speaking in its favor not because it is more hawkish but for what reason? | 19 |
fomc | 2,007 | Because it describes what is, and that is that inflation is elevated. | 14 |
fomc | 2,007 | My concern is that, as the Chairman has said, if you look at the three-month annualized rate for a whole bunch of measures of core, "elevated" might be overstating it a bit. | 43 |
fomc | 2,007 | It isn't to me, because 2.6 year over year is elevated. | 16 |
fomc | 2,007 | The original intention was to capture the last relatively few monthly readings, so there is a bit of ambiguity there. | 22 |
fomc | 2,007 | My point is that what you're describing is the systematic move down, and the margin is bringing the average down, and that's what you say: "Readings on core inflation have improved modestly in recent months but remain elevated." So long as we can convey that, I think the markets will read us more properly because, even... | 122 |
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