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fomc | 2,007 | Thank you. President Plosser. | 8 |
fomc | 2,007 | Thank you, Mr. Chairman. The economic picture in our region has changed little since our last meeting. It seems as though I've used that phrase almost every meeting for the past three meetings. Economic activity is expanding at a moderate pace in our District. Business contacts expect that pace to continue in the comin... | 1,380 |
fomc | 2,007 | Thank you. President Hoenig. | 7 |
fomc | 2,007 | Mr. Chairman, I'll spend a little time on the District. I think you can describe it as almost robust, recognizing that we are a District that exports a lot of raw materials and byproducts of raw materials. We have had solid job gains led by further tightening in our labor markets, and recent revisions suggest that 2006... | 1,061 |
fomc | 2,007 | Thank you. President Fisher. | 6 |
fomc | 2,007 | Mr. Chairman, I was reminded the other day that the original story of Goldilocks was not quite as we later came to learn it. The first version that was drafted was actually called Silver Hair. When the three bears came back to the house, the elderly lady, not the little girl, jumped out the window. That was the beginni... | 1,850 |
fomc | 2,007 | Thank you. President Lacker. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. Overall, economic activity in the Fifth District expanded modestly in recent weeks, though performance across sectors remains uneven. Growth is centered in the services sector, where moderately positive readings continue. Real activity has recovered somewhat in recent weeks, and big-ticket sale... | 790 |
fomc | 2,007 | Thank you. President Pianalto. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. Comments from my business contacts confirm the softening in economic activity that is depicted in the Greenbook. Most of the people I talked with during this intermeeting period confirmed the slowing that we are seeing in the national data. But at the same time, they expect that business will i... | 585 |
fomc | 2,007 | Thank you. President Minehan. | 7 |
fomc | 2,007 | Thank you very much, Mr. Chairman. Perhaps unlike in the rest of the country, most of the recent cyclical data point to some reasons for optimism about near-term growth in New England, with the possible exception of the rate of foreclosure initiations related to subprime mortgages. The annual benchmark revisions by the... | 1,630 |
fomc | 2,007 | Thank you. President Minehan, could you just say a word about your outreach on the mortgage problems? | 21 |
fomc | 2,007 | We have done quite a bit of work with the Banking Department of the State of Massachusetts and with the Massachusetts Bankers Association. We have had meetings with those two groups in many of the affected areas around Massachusetts, basically looking to provide education. We've done some materials on the education sid... | 123 |
fomc | 2,007 | Well, we here in Washington expect to have to answer a few questions about the subprime situation, and we would be very interested in anyone's experience. If any other Reserve Bank is involved or has any plans, we'd be interested to hear about them. | 51 |
fomc | 2,007 | I think we recently forwarded some information to Governor Kroszner about this. | 16 |
fomc | 2,007 | I haven't received it. If you sent it by mail, it could take a while. | 18 |
fomc | 2,007 | No, no, no--I know that. [Laughter] I think we did it by e-mail, and someone in your Community Affairs area may be in the process of passing it along. | 40 |
fomc | 2,007 | Okay, great. | 4 |
fomc | 2,007 | But I have a copy of the e-mail in my Blackberry. | 13 |
fomc | 2,007 | They have to check the e-mail for anthrax here. [Laughter] | 16 |
fomc | 2,007 | I wondered about that. Don didn't get one yesterday. | 11 |
fomc | 2,007 | On that note, why don't we take fifteen minutes for coffee and come back around 4:40 or a little after. The coffee is in the anteroom. | 34 |
fomc | 2,007 | If we could reconvene--I see a two-hander from Governor Kroszner. | 19 |
fomc | 2,007 | I just wanted to mention with respect to foreclosures and wanted to double-check my facts--a note had been sent out from the Board's Consumer and Community Affairs Division to your consumer and community affairs groups concerning your activities in mortgage foreclosures, and Jeff Lacker fortunately has invited me to a ... | 191 |
fomc | 2,007 | I'm sorry. What are you looking for examples of--mortgages we foreclosed on? [Laughter] | 22 |
fomc | 2,007 | Just the opposite--Sandy could use examples showing that we've done some outreach to help deal with some of the challenges of foreclosure. Are there educational efforts or studies that have been done? | 37 |
fomc | 2,007 | We want to be the good guys. | 8 |
fomc | 2,007 | President Lockhart. | 4 |
fomc | 2,007 | Thank you, Mr. Chairman. Thank you for the earlier welcome. Over the intermeeting period, aggregate economic activity in the Sixth District showed signs of slowing. Manufacturing activity appeared to soften, with the majority of reports suggesting declining orders. Retail reports pointed to a slowing pace of sales. The... | 898 |
fomc | 2,007 | Thank you. President Stern. | 6 |
fomc | 2,007 | Thank you, Mr. Chairman. As others have commented, the latest numbers on the performance of the national economy have been mixed, which is to say less positive than I had expected; and I take the Greenbook's point that growth is subdued this quarter. I don't view the recent news on inflation as especially favorable, bu... | 449 |
fomc | 2,007 | Thank you. President Poole. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. Regarding the small handful of contacts with whom I've talked, my trucking industry contact finds things slightly better in February and March, but things had been very, very slow before that. The company has reduced its truck fleet by 300. My contact says that pricing is flat for the first tim... | 728 |
fomc | 2,007 | Thank you. Vice Chairman Geithner. | 9 |
fomc | 2,007 | Thank you, Mr. Chairman. Our view of the outlook has changed since our last meeting, but more in the balance of risks and the sources of uncertainty than in our actual forecast for growth. But just to go through the changes quickly, we've reduced our forecast for growth in '07 a bit, to something less than 3 percent, a... | 1,492 |
fomc | 2,007 | Thank you. Governor Kohn. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. Like many others, I view the data over the intermeeting period as not fundamentally undermining the basic contours of our expected forecast. We're still on track for moderate growth and gradually ebbing inflation. The economy has enough underlying strength, bolstered by financial conditions tha... | 1,000 |
fomc | 2,007 | Thank you. Governor Warsh. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. Let me say at the outset that I believe the moderate-growth scenario is the most likely for 2007. But as many of you have already discussed, I had thought that business fixed investment particularly was a very real upside opportunity and now consider it a very real downside risk. The Greenbook ... | 1,736 |
fomc | 2,007 | Thank you. Governor Kroszner. | 9 |
fomc | 2,007 | Thank you very much. I very much agree with President Stern's characterization that, although some of the incoming data are a bit weaker than we had been seeing, we certainly shouldn't overreact. Optimally, we should react to what the data tell us about the future, and I'm not sure we've learned an enormous amount abou... | 1,433 |
fomc | 2,007 | Thank you. Governor Mishkin. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. One way I think about the situation is to compare what's happening now, not to the last meeting, but to two meetings before. From December to January we had positive news. Now we have gone from January to March, and we've had negative news. When you look at the overall picture, we're not in a v... | 786 |
fomc | 2,007 | Thank you. Thank you very much for the comments. I'm going to offer, as I always do, a brief summary and invite any comments and corrections, and then I'd like to add a few comments of my own. Most participants today agree that growth looks as though it's going to be slower, but there is some diversity of opinion about... | 1,531 |
fomc | 2,007 | 2 I have the unenviable position of being the last speed bump between you and the open bar across the street. [Laughter] In the interest of time, I'd like to draw your attention to the latest version of table 1 and then deliver the rest of my remarks tomorrow. That way you'll get a chance to cogitate over the changes t... | 315 |
fomc | 2,007 | Thank you. I hope you'll join me now in bidding farewell to Governor Bies. We will reconvene tomorrow at 9:00 a.m. 2 The table to which Mr. Reinhart refers is appended to this transcript (appendix 2). | 52 |
fomc | 2,007 | Vincent. | 3 |
fomc | 2,007 | Thank you, Mr. Chairman. | 7 |
fomc | 2,007 | How nice you look today! | 6 |
fomc | 2,007 | Thank you. That will be noted in the transcript. [Laughter] | 15 |
fomc | 2,007 | I liked his red vest better. | 7 |
fomc | 2,007 | 3 That won't be noted in the transcript. [Laughter] I'll be referring to the materials right in front of you. Financial markets were volatile over the intermeeting period amid a repricing of risky assets. As can be seen in the top left panel of your first exhibit, monetary policy expectations shifted down almost 1/2 pe... | 1,882 |
fomc | 2,007 | Thank you. Are there questions for Vincent? Governor Kohn. | 13 |
fomc | 2,007 | Vincent, on exhibit 2, the two-year Treasury spread over the target federal funds rate, for a while we have been discounting the tendency of the ten-year rate to be below the fed funds rate because term premiums have been unusually low, so we've said it's not as indicative of expected weakness. Are term premiums low fo... | 76 |
fomc | 2,007 | To start where we are now, to get to about 25 basis points or zero at the ten-year mark, you probably should smooth across the maturity structure. Yes, indeed, the two-year term premiums are lower, so some of the low level of the spread does reflect less compensation for risk. At the same time, we haven't done much to ... | 106 |
fomc | 2,007 | President Poole. | 4 |
fomc | 2,007 | I had essentially the same question. If you take the two-year rate over the past year, how much of that could be explained by a change in the term premium? You said term premiums are low, but I'm talking about the change. | 48 |
fomc | 2,007 | You have to go back about two years. The term premium started declining about two years ago. | 19 |
fomc | 2,007 | But quantitatively, how big is that? | 9 |
fomc | 2,007 | Quantitatively, a good portion is due to lower term premiums. | 14 |
fomc | 2,007 | Okay. But then, does that have much bearing on, let's say, Eurodollar futures a year or a year and a half out? | 29 |
fomc | 2,007 | Well, you'd assume that there are arbitrage opportunities across the collection of fixed-income securities, and lower term premiums in the Treasury market are not a peculiar attribute just for the Treasury market. They say something about investors' attitudes toward risk and perception of risk, and that should be refle... | 74 |
fomc | 2,007 | But if we take the change in the Eurodollar market just since the last FOMC meeting, or take your exhibit 1, the top right-hand panel or the top left-hand panel, my instinct is that it has to reflect almost entirely changes in market views about the future fed funds rate. | 61 |
fomc | 2,007 | I think your instinct would be guided by the top middle panel, which shows that implied volatility went up, which would not be consistent with term premiums going down. We would first see, at the very short end, that the sensitivity of the term premiums to volatilities is lower than it is with longer capital instrument... | 80 |
fomc | 2,007 | Thank you. | 3 |
fomc | 2,007 | Are there other questions? If not, we're ready for our policy go-round. President Poole. | 20 |
fomc | 2,007 | First of all, I like alternative B. I'll start with that. I think we have a couple of issues that are pulling in different directions. Vince talked about this a bit. A lot of people in the market seem to believe that de facto our inflation objective is more like 11/2 to 21/2 percent. They don't really believe 1 to 2. T... | 497 |
fomc | 2,007 | Thank you. President Hoenig. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I am inclined toward leaving the rate unchanged, so that would be alternative B. I'd like to comment on a couple of things. Although the downside risk to growth appears to have increased somewhat on a national level since the last meeting, I continue to expect that we will see a pickup in the e... | 412 |
fomc | 2,007 | Governor Kohn. | 4 |
fomc | 2,007 | Thank you, Mr. Chairman. I also favor keeping the federal funds rate at the current level. As many people remarked yesterday, that probably stands the best chance, for now anyhow, of keeping growth at a reasonably good rate and reducing inflation at least a little further, albeit gradually--the best chance, that is, of... | 560 |
fomc | 2,007 | Thank you. President Plosser. | 8 |
fomc | 2,007 | Thank you, Mr. Chairman. As has already been suggested, I, too, favor maintaining the fed funds rate today at 51/4 percent. As I said in the first go-round, the data we have received since the last meeting have certainly increased my uncertainty about the forecast. But I think that the fundamentals haven't changed that... | 844 |
fomc | 2,007 | Thank you. President Pianalto. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I also favor leaving our policy rate unchanged today, and I support the language in alternative B, although I find myself sympathetic to the assessment of risk language in alternative A. The incoming information we have received since our last meeting has led me to believe that the economy may ... | 275 |
fomc | 2,007 | Thank you. President Minehan. | 7 |
fomc | 2,007 | Thank you very much, Mr. Chairman. I, too, am very much in favor of staying put with our current stance of policy. As I said yesterday, my own sense, as I listened to the commentary around the table, is not terribly different from that of everybody else--a sense that risks have risen on both sides of the forecast. But ... | 681 |
fomc | 2,007 | Thank you. President Stern. | 6 |
fomc | 2,007 | Thank you, Mr. Chairman. Well, I'm largely in agreement with all I've heard around the table so far this morning. As others have commented, I think yesterday's discussion and the incoming data on the economy suggest that uncertainty about the outlook, in terms of both growth and inflation, has increased at least a bit,... | 237 |
fomc | 2,007 | President Yellen. | 4 |
fomc | 2,007 | Thank you, Mr. Chairman. I support the Bluebook alternative B, both leaving the federal funds rate unchanged and also the language basically as it stands. I think the current stance of policy is likely to foster an economy that gradually moves toward a soft landing of the type portrayed in the Greenbook forecast, but o... | 337 |
fomc | 2,007 | Thank you. President Moskow. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. As I mentioned yesterday, my overall assessment of the economy calls for growth to average somewhat below potential in '07 and to improve in '08, and I expect labor markets will remain tight with the unemployment rate staying below 5 percent. Core inflation is higher than I like. I see some for... | 602 |
fomc | 2,007 | Thank you. President Poole. | 7 |
fomc | 2,007 | I think the likely effect of taking the firming language out this afternoon will be as Mike Moskow suggests. But the more important point is how it conditions the market over the period to the next meeting. There I think it's going to be driven by the flow of incoming data, and I think that's the more important point. | 65 |
fomc | 2,007 | Well, we'll see. [Laughter] | 9 |
fomc | 2,007 | Good answer. I think it's tentative--the judgment is tentative. | 13 |
fomc | 2,007 | President Lacker. | 4 |
fomc | 2,007 | That's totally immaterial to whether this is going to affect what the rate is at the next meeting. I mean, lots of changes to rates could occur between now and the next meeting, or the effect of this statement on rates after this meeting could persist until the next meeting. So I don't see how it's relevant, Bill. | 65 |
fomc | 2,007 | President Lockhart. | 4 |
fomc | 2,007 | Well, like so many others, I agree with keeping the funds rate at the current level and the language in alternative B. We're experiencing real growth at about the rate we expected, but inflation is no longer declining. Having said that, I'm comfortable with the current policy and don't see a need to move until we becom... | 145 |
fomc | 2,007 | Thank you. President Fisher. | 6 |
fomc | 2,007 | Well, Mr. Chairman, yesterday I indicated concern for the downside, even though I come from a District that is running a pretty warm economy. My soundings with business leaders and my interpretation of what I heard around the table yesterday lead me to conclude that we are perhaps one revision or one shock, including p... | 349 |
fomc | 2,007 | Thank you. President Lacker. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I'm okay leaving the fed funds rate unchanged today. I say that despite the fact that inflation readings have been less favorable lately. Core inflation is clearly higher than we want. I see little reason to expect moderation anytime soon without action on our part. If the truth about the forec... | 366 |
fomc | 2,007 | Thank you. Governor Warsh. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I also generally share the views of alternative B and favor maintaining the federal funds rate today. I thought what I'd do is just highlight a couple of things. First, I think the statement needs to be reflective of the real economy rather than financial markets, as we discussed yesterday. So ... | 443 |
fomc | 2,007 | Thank you. Governor Kroszner. | 9 |
fomc | 2,007 | Thank you very much. I, too, favor alternative B--keeping the federal funds rate constant at this point. From the discussion yesterday, I gather that many of us still see in some cases a substantial risk that inflation just won't come down from where it is. Also, from the discussion yesterday, I think that there is a b... | 816 |
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