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fomc | 2,007 | Thank you, Mr. Chairman. I thought I would begin by saying a few words on process. I've had a number of questions from people about where we are in the process of considering communication issues and how we see the next couple of meetings. I hope that today we can come up with some sense of the central tendency or an e... | 706 |
fomc | 2,007 | 4 Thank you, Governor Kohn. Brian Doyle, Vincent Reinhart, and I will be speaking this morning on the material labeled "Staff Presentation on Producing and Publishing Economic Forecasts." As the top panel of your first exhibit notes, the Federal Reserve regularly provides the public with information on the outlook in t... | 1,717 |
fomc | 2,007 | As Dave has explained, policy committees at central banks may choose to produce and publish one of several different types of forecasts--centralized, coordinated, or independent--or they may choose to release a staff forecast. In the table at the top of exhibit 4, columns A, B, and C show some of the forecast publicati... | 1,006 |
fomc | 2,007 | Exhibit 5 presents a decision tree outlining the possible paths you might take in incorporating an economic forecast in the policymaking process. I am including this schematic because, among other reasons, it is just what you would expect from me. [Laughter] Before we trace out some of those limbs, I want to remind you... | 1,132 |
fomc | 2,007 | Thank you. Are there questions for the staff? President Fisher. | 13 |
fomc | 2,007 | May I ask one question of Brian? | 8 |
fomc | 2,007 | Yes. | 2 |
fomc | 2,007 | Brian, on your exhibit 4, you point out that there's no econometric evidence that publishing forecasts--these improved methodologies--has actually had an effect from an econometric standpoint. But you make the statement that observers agree that forecasts have improved communications and accountability, which is a more... | 64 |
fomc | 2,007 | They would be a combination of market participants, academics, and anyone with an interest in what central banks do or say. | 24 |
fomc | 2,007 | How do we measure "improved communications and accountability"? It seems to be very subjective. | 18 |
fomc | 2,007 | Unfortunately it is. | 4 |
fomc | 2,007 | Finally, I am just not as familiar as the rest of the FOMC is, but do any of these banks have a dual mandate stated like our dual mandate? | 34 |
fomc | 2,007 | Certainly. Other central banks have multiple objectives. Some that are specifically stated are the ones that the Federal Reserve has stated: maximum employment and stable prices. I'm not sure, but some are quite close in terms of keeping inflation low and watching output as well. | 51 |
fomc | 2,007 | May I help answer this? | 6 |
fomc | 2,007 | Governor Mishkin. | 4 |
fomc | 2,007 | The Norges Bank is actually the clearest on something close to a dual objective. In their inflation report, they have several statements of their objectives, and they explicitly say that they have a flexible inflation target regime. That's the first statement. What that means is that they actually are going to try to m... | 134 |
fomc | 2,007 | But currently it's the Norges Bank. | 7 |
fomc | 2,007 | Currently the Norges Bank is the clearest. | 9 |
fomc | 2,007 | Thank you. | 3 |
fomc | 2,007 | President Fisher, I think almost all central banks, even the so-called "formal inflation targeters," have in their mandate that they are to support economic activity insofar as it is consistent with price stability. President Lacker. | 45 |
fomc | 2,007 | This isn't a question. | 5 |
fomc | 2,007 | I'm sorry. Is this for a go-round, or do you have a question? | 17 |
fomc | 2,007 | I don't have any questions. [Laughter] | 10 |
fomc | 2,007 | Just answers. [Laughter] | 7 |
fomc | 2,007 | Then please start. | 4 |
fomc | 2,007 | I thought the documentation distributed by the staff did a good job of identifying the purposes that publishing forecasts ought to serve. They're consistent with what I described in past meetings as guiding principles--namely, that communication is useful to the extent that it helps the public form better expectations ... | 1,493 |
fomc | 2,007 | Vice Chairman Geithner. | 6 |
fomc | 2,007 | You said one thing that surprised me, Jeff. You began by saying that the objective should be to help reduce the public's uncertainty about future macroeconomic outcomes generally. Now, I can see that we have some capacity to reduce the public's uncertainty about what inflation is going to be over time, but is it realis... | 121 |
fomc | 2,007 | I'm not suggesting that we reduce the public's uncertainty to less than our uncertainty about future outcomes. But the econometric evidence is that Greenbook forecasts are superior to the private sector's forecasts. So if the public knew them, their uncertainty would be lower. I think there's reason to suspect that mor... | 78 |
fomc | 2,007 | President Minehan. | 4 |
fomc | 2,007 | I didn't know I was going to go second, but that's all right. | 15 |
fomc | 2,007 | You can ask a question if you'd like. [Laughter] | 13 |
fomc | 2,007 | No, I've got plenty of questions here. Anyway, I, too, appreciated the range of staff material that went into the preparation for this discussion. An awful lot of alternatives are on the table, and I think it's good that we've been asked to focus on eight questions to try to clarify things. But from my view, the most i... | 2,664 |
fomc | 2,007 | Thank you. A two-hander from President Moskow. | 12 |
fomc | 2,007 | I have just a factual question. On the existing Monetary Policy Report, you described it as the Chairman's view. I looked at the existing report. It has a table with the forecast and then a few paragraphs describing that forecast. | 46 |
fomc | 2,007 | It's the Board's. | 5 |
fomc | 2,007 | The Board staff's? | 5 |
fomc | 2,007 | No. Ultimately, the Board discusses it in a meeting, and it's transmitted on behalf of the Board of Governors to the Congress to fulfill its legislative requirement. So the Board is directed in the law to provide it. | 43 |
fomc | 2,007 | Not the Committee? | 4 |
fomc | 2,007 | No. The Board is explaining Committee policymaking, but it's the Board's responsibility. | 17 |
fomc | 2,007 | So you wouldn't characterize it as the Chairman's? | 10 |
fomc | 2,007 | No. The Chairman may choose to talk about the forecast in his testimony. So in some sense you really have two opportunities to talk about the Committee's forecast. | 32 |
fomc | 2,007 | Governor Kohn. | 4 |
fomc | 2,007 | When the act was being rewritten, after the Humphrey-Hawkins report was sunsetted, we raised the question of whether it should be a Committee report rather than a Board report. But the congressional staffs are very focused on making it a Board report, in part because they feel that's where the accountability is in the ... | 66 |
fomc | 2,007 | President Yellen. | 4 |
fomc | 2,007 | Thank you, Mr. Chairman. I also want to begin by complimenting the staff for a very thorough and thoughtful set of background materials. In recent years we have made notable strides toward increasing transparency, and that has served to enhance public accountability and to improve the efficacy of policymaking. At this ... | 2,198 |
fomc | 2,007 | Thank you. | 3 |
fomc | 2,007 | May I just ask one question? | 7 |
fomc | 2,007 | President Minehan. | 4 |
fomc | 2,007 | Thank you. That was really interesting, Janet. Your recommendation would be not to condition on a common policy path but have "appropriate policy." So in the end when we publish the forecasts, would it be a range of federal funds rates? | 48 |
fomc | 2,007 | Has this sheet come around to you? | 8 |
fomc | 2,007 | All right, so it's a range then. | 9 |
fomc | 2,007 | If you look at this sheet--we might do this for all the variables--the bottom right panel shows the federal funds rate. These are obviously made-up numbers. But we have the history, and people would just add their own forecast for Q4 for the federal funds rate. We'd report a central tendency, and we would develop error... | 99 |
fomc | 2,007 | So the background in there is the range of federal funds rates, of appropriate policies that people submitted with their reports. | 23 |
fomc | 2,007 | Yes, the dark band in the center would be the central tendency of our reports, and the thinner, longer lines would be bands generated by numbers we use for forecast uncertainty. | 35 |
fomc | 2,007 | Thank you. | 3 |
fomc | 2,007 | Thank you. I'm embarrassed about time planning here. These comments have been extremely interesting, but I'm worried about flights and things of that sort. Everyone should feel free to give their full views. Be mindful, if you can, of time, and if we don't have enough time, we'll have to think about how we might reconv... | 77 |
fomc | 2,007 | Yes. I just wanted to ask about the 70 percent interval. Does that reflect everyone's uncertainty? | 20 |
fomc | 2,007 | We would have to discuss how to produce that, but it might be based on, for example, our FRB/US forecast errors that we would apply to the central tendency range. | 37 |
fomc | 2,007 | Sorry, Mr. Chairman. May I just try this again? I interpret you as saying that you infer a central tendency from this process you outlined. | 30 |
fomc | 2,007 | With respect to the story? | 6 |
fomc | 2,007 | You discern a central tendency of the Committee about our view about GDP or unemployment. | 16 |
fomc | 2,007 | Well, we're submitting numbers. | 6 |
fomc | 2,007 | Then you attach some other method for framing uncertainty based on past forecast errors--for example, of FRB/US, Greenbook, Blue Chip, or somebody else. | 34 |
fomc | 2,007 | Yes, exactly. | 4 |
fomc | 2,007 | Or our own forecasts. | 5 |
fomc | 2,007 | Or our own forecasts. | 5 |
fomc | 2,007 | But, no, it can't be that either. That's a little different, isn't it? | 18 |
fomc | 2,007 | We don't forecast the federal funds rate, but we do have data on our own errors with respect to the other variables. | 24 |
fomc | 2,007 | But you're not suggesting that we try to aggregate or ask the staff to aggregate our own uncertainties that we convey with our own individual forecasts, right? | 29 |
fomc | 2,007 | No, I think that would not be a very useful procedure. | 13 |
fomc | 2,007 | There's research at the St. Louis Bank that says that the FOMC forecasts are actually pretty good. Was there another two-hander? President Poole? | 32 |
fomc | 2,007 | I have a couple of fairly quick points to make. First, in terms of the audience we're talking to, you really have to talk to the Congress first. We operate under the Federal Reserve Act, and we're reporting to the Congress. That's a very important part of the audience. I would put the markets second and then the genera... | 482 |
fomc | 2,007 | Thank you. Governor Mishkin. | 7 |
fomc | 2,007 | First of all, I want to deal with the general question that Cathy alluded to at the outset. I am strongly supportive of more-effective reporting of a forecast for several reasons. One is that it helps the market to understand our actions better, and I think that has a high value. It can be part of the process of anchor... | 1,715 |
fomc | 2,007 | Always charming. | 3 |
fomc | 2,007 | It's hard enough for the Bank of England to do it with a committee of nine people. We have nineteen. Furthermore, at the Bank of England they're all living in the same house and talking to each other all the time. We have people all over the country with very different jobs, and so it's just infeasible to do it. I thin... | 1,460 |
fomc | 2,007 | Thank you. Intervention, President Moskow. | 9 |
fomc | 2,007 | I have just a quick question about the narrative. Would you see a narrative significantly different from the narrative that's now in the Monetary Policy Report, other than the fan charts or anything else that would be added? Would you see the same type of thing--a few paragraphs describing the forecast? | 57 |
fomc | 2,007 | This is why we need trial runs. The narrative needs to be a little more detailed than that and actually a little more reflective of the different views. I think it's a question of writing a good story. One thing I have learned is that, even as a scholar, I learn particularly from writing. In this case I think the Commi... | 137 |
fomc | 2,007 | President Fisher. | 3 |
fomc | 2,007 | Mr. Chairman, we talked briefly about the Norges Bank and Norway, which is a country of 4.6 million people, a constitutional monarchy, and my mother's homeland. My mother taught me a wonderful phrase, which I want to repeat here as an antecedent to this discussion. It's actually a quote from Santayana: Skepticism, like... | 1,323 |
fomc | 2,007 | Thank you. President Hoenig. | 7 |
fomc | 2,007 | Thank you. I'll frame my remarks around two propositions. The first is the "yes." We should be receptive to changes in our practices and procedures to the extent that they make monetary policy more effective and provide clear public benefit. My general sense is that providing more information about our views on the eco... | 965 |
fomc | 2,007 | Thank you. Governor Kohn. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I want to join the others in thanking the staff for their very helpful memos. These issues are complicated, and some of them are even hard, as has been said, and I found all the memos helpful to me in framing my ideas on this subject. I find myself, importantly, in agreement with President Yell... | 1,762 |
fomc | 2,007 | Thank you. First Vice President Barron. | 9 |
fomc | 2,007 | Thank you, Mr. Chairman. It may come as a surprise to some of my colleagues, given my expressed concerns over publication of numerical inflation targets, that I am very supportive of publication of forecasts by participants. The Committee has for some time now made routine references to the outlook in the statement, wi... | 796 |
fomc | 2,007 | Thank you. President Pianalto. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I also want to start by saying that the memos that we received from the staff before this meeting were helpful, and I think that Vincent provided the right set of questions to guide our discussions. The goals that were laid out in the memo that Dave distributed seem appropriate to me. From that... | 1,016 |
fomc | 2,007 | Thank you very much. It is a little after 1:00. Why don't we take a break for lunch? If people could be flexible, we can start somewhere around 1:30, maybe a few minutes before, depending on how efficiently lunch is served. If anyone has concerns about flights or anything like that, could you please let me know during ... | 80 |
fomc | 2,007 | Do you have a sense, a reasonable expectation, of when you think we'll try to stop? It's very important, but we could do this for days. | 31 |
fomc | 2,007 | It should be somewhere between 2:30 and 3:00, if we take a half an hour for lunch now, unless I hear concerns about flights and the like. It's lunch time. Thank you. [Recess] | 47 |
fomc | 2,007 | Let's resume. Thank you. Let me start by saying that we've had an enormous amount of discussion. If anyone is inclined to submit a memo to the Committee or to the subcommittee elaborating on your views or responding to some things that you've heard, please feel free. It will be very helpful to receive any information l... | 76 |
fomc | 2,007 | Thank you, Mr. Chairman. In the interest of time, I'd like to be able to say that I agree with Governor X or President Y and just let it go at that, but there are some nuances that I feel compelled to cover, so I will. Let me just start out by saying that, while I certainly favor some changes to the production and publ... | 882 |
fomc | 2,007 | Thank you. Governor Bies. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. Let me just make an introductory remark, and then I'm going to go through these questions fairly quickly. First, I've heard different reasons here for our looking at change. One issue is to improve the credibility of the Fed. The point about credibility that I'd like to make is that it is a tru... | 1,240 |
fomc | 2,007 | Thank you. President Plosser. | 8 |
fomc | 2,007 | Thank you, Mr. Chairman. I will try to be brief. I was impressed with President Yellen's excellent presentation and the thoughtfulness and scope of what she talked about, and I agree almost 100 percent with everything she said. But I want to mention a few things that I think are important. There's an old forecasting ad... | 1,521 |
fomc | 2,007 | Thank you. Governor Warsh. | 7 |
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