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fomc
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Core inflation has come down recently. But as I mentioned earlier, my sense is that it could well rise again. In any event, it doesn't seem likely to fall much further. So I think we have to position ourselves to do something about inflation when we are more certain that the soft patch is behind us. I support the actio...
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Thank you. President Hoenig.
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Mr. Chairman, I am very comfortable with our current stance at 51/4 percent. I think that it is, as I have said before, modestly restrictive and that it will take us over time to a lower inflation rate. On the statement itself, I have a couple of comments. I am a little uncomfortable with the language used in the outpu...
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Thank you. President Stern.
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Thank you, Mr. Chairman. Well, like others, I think the case for alternative B is convincing. I don't think we have any reason to contemplate changing the fed funds rate target at this point or trying to change market expectations about what we are up to. As far as the language is concerned, something that came up at t...
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I am not so sure about that. [Laughter] Thank you. President Poole.
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Thank you, Mr. Chairman. I support alternative B, and I also support the slight revision in the wording that Governor Kohn recommended. One thing that I worry about and that I hope we can make clear in the minutes--clearly, we couldn't do it in the statement--is that we have been in an unusual period. If you look at Gr...
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Thank you. We have seen some change in policy expectations, obviously, in the intermeeting period. President Moskow.
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Thank you, Mr. Chairman. I am very comfortable with the policy stance--keeping the rate at 51/4 percent. I think policy is in the right place. It is moderately restrictive but not restrictive enough to cause us any problems, particularly in the housing area. In terms of the statement itself, I am comfortable with alter...
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The minutes should certainly make that point because the staff has emphasized that this may be transitory.
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Thank you. President Plosser.
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Thank you, Mr. Chairman. As people said before, I, too, am in favor of keeping the fed funds rate at 51/4 percent. The economy does seem to be rebounding in the second quarter. The lingering uncertainty over housing suggests that now is not the right time to take more-aggressive action. I am in agreement with that. How...
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Thank you. President Pianalto.
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Thank you, Mr. Chairman. I also support the policy action in alternative B. I have some of the same concerns that President Lacker and President Plosser, and also President Yellen in her letter, raised about the increasing difficulty in characterizing inflation without having a clear sense of the Committee's longer-ter...
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Thank you. President Minehan.
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Thank you, Mr. Chairman. I, too, am in favor of keeping policy where it is. As I stated yesterday, I see the risks around growth as better balanced than they were, even given the potential for the housing problems to be deeper and longer-lasting than we might have expected earlier in the year. I remain concerned about ...
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How about something like "Economic growth proceeded at a moderate pace"?
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There are many ways to do it. I know that there are some objections to this, but you could say, "Despite the ongoing adjustment in the housing sector, the economy appears to have grown at a moderate pace over the first half of this year and seems likely to continue growing moderately over the coming quarters." You coul...
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We are talking about the economy, so mentioning it twice seems to be reasonable. [Laughter]
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We have two sentences starting exactly the same way, though. In any event, this is a nit in the overall scheme of things.
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Thank you. President Lockhart.
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Thank you, Mr. Chairman. I, too, favor alternative B and the current policy stance. My interpretation of the discussion around the table yesterday is that we see encouraging signs that the current policy appears to be producing the desired directional effects at least, or intermediate effects, so it seems to be working...
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Thank you. President Yellen.
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Thank you, Mr. Chairman. I certainly agree that policy is well positioned, and we should leave it exactly where it is. Markets have come around to our view, and I think our objective in the statement should be to keep market expectations aligned with our view and not to change them. In terms of the statement, I think t...
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Thank you. Governor Warsh.
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Thank you, Mr. Chairman. Like many of you, I see no reason to materially change market expectations about our policy action. It is important that we not appear more comfortable with either the level or the trend of inflation than we actually are. Any nods in that direction in the statement are ripe to be misinterpreted...
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Thank you. Governor Kroszner.
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Thank you very much. As I mentioned yesterday, I think we have seen some very welcome signs of moderation, but it is certainly too early to declare a victory. That is certainly very clear in the Greenbook, as many of you emphasized. I also agree with Governor Kohn that we are in a reasonably good spot with moderate gro...
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Thank you. Governor Mishkin.
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Thank you. I support alternative B with the amendment that Governor Kohn suggested, so I am very comfortable with that. The real issue for me here is one that I think has been expressed by several others, what President Plosser called the "elephant in the room," which is that writing the statement is getting harder and...
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Thank you. Governor Mishkin and others have referred to communication issues. I'd just point out that we will be addressing some of those later this morning. Vice Chairman Geithner.
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I actually agree with--and am happy associating myself with--much of what has been said. I am totally comfortable with alternative B as amended by Don or with the Kohn-Kroszner amendment because you don't need to repeat "inflation" twice in the end, [laughter] and I think we should keep the rate as it is.
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Tim, I'm sorry, I heard my name but I didn't hear what you said about me. [Laughter]
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Change the word "inflation" to "those."
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Several of you put on the table a bunch of broader questions about communication going forward, which I would like to talk about now, but I think we should defer that until we come to the later conversation. So I am fine with alternative B as amended. I do think that a lot of you made many interesting suggestions about...
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Thank you. Well, we appear to be in considerable agreement about the policy action. [Laughter] It is a good thing, I guess. Not only are we in agreement, but also the bond market is in agreement. [Laughter] I would just note that, in fact, the bond market is acting as an automatic stabilizer, responding to news, as we ...
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That works.
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A little more variation--is that acceptable?
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Could you read that again?
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The proposal is, "Economic growth appears to have been moderate," and then it goes on, as it says here, "during the first half of this year, despite the ongoing adjustment in the housing sector." I see nodding, so I think that is accepted. I'm sorry. No?
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There is a tense question. The first half of the year isn't over.
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Yes, it is--almost. [Laughter] Well, I mean, that is no different from what we already have.
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It's the word "appears," which is fine.
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The content is no different.
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Okay.
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Is everyone okay with the language?
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Yes. Well, at least that solves the instant problem.
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You do know that English professors get paid very little money. [Laughter]
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That is what I'm going to--very little money. [Laughter]
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I think President Minehan is entitled to her change, given that she is valedictory in this. [Laughter] So with that change--"Economic growth appears to have been moderate during the first half" et cetera--that would be my recommendation. Are there any further comments?
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Mr. Chairman?
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President Plosser.
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Just a clarification. On section 3, can somebody just read that complete section as now amended?
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The entire statement: "The Federal Open Market Committee decided today to keep its target for the federal funds rate at 51/4 percent. Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector. The economy seems likely to continue to expand at ...
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This is just one observation. The second sentence of section 3, where we talk about capacity utilization, seems to be redundant once you put "inflation pressures" in the first sentence.
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Well, look at the May statement. We have been doing that for a while now. [Laughter] Are there any other questions or comments? If not, I'd like to call for a vote.
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I will be reading the directive from page 29 of the Bluebook. "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee in the immediate future seeks conditions in reserve market...
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Thank you. The coffee is not yet brewed. [Laughter] So why don't we go on to the next phase of the meeting. We turn to Vincent to discuss communication issues.
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5 Thank you, Mr. Chairman, for giving me the normal role as speed bump. In that effort we are now handing out material to which we will be referring. If someone will let me know when the doughnut truck comes, I'll pick up the pace. [Laughter] The Subcommittee on Communications began its work only fifteen months ago, [l...
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Thank you. Are there any questions? Vice Chairman.
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Vince, it's a little unclear from what you've circulated what the subcommittee is recommending or presuming about the pieces of material that would go into the Monetary Policy Report. Do you want to say just a little about options there? I assume you want people to comment on that question, too, and that goes to the co...
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That's a complicated governance issue because it relates to both what the Committee approves potentially and what the Board approves because the Monetary Policy Report is by law a report of the Board of Governors explaining the monetary policy actions of the Committee. The short answer is that it depends on what you wa...
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Those choices I think I understand, but I was really thinking about the pictures. You circulated a whole different set of new things, innovative pictures that showed dispersion, uncertainty, balance of risk, histograms, and so forth. I guess you don't need to answer this question, but do you want people to react, in th...
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If you don't express a view here, you'll have a chance in commenting on what the staff proposes. Our intention was to take a small subset of those charts and tables that were essential for explaining the central tendency projections themselves and the dispersion of views and to put them into the narrative. The draft th...
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How small a subset?
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About the same size as the last draft we circulated, which was, in fact, circulated as an appendix in Debbie Danker's memo.
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I didn't mean that. I'm sorry. I meant the graph showing the evolution of the central tendency with things plus the histograms? That's what I meant by subset.
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Yes.
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Excuse me, but the histograms we're talking about are the individual differences?
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Yes. Well, that's what we circulated last time in the draft write-up of the May discussion.
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So you would have the central tendency analysis that we have and then further amplification, which would show individual differences of the nineteen members of the Committee.
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Potentially that's what we would have.
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I'm just trying to understand what we're going to talk about.
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The staff draft of the June narrative will be similar in structure to the May narrative. That, however, is only the first draft. Given that we intended it to be similar in structure to the May narrative, then we would include a couple of histograms. We also added in this package a revised picture of the central tendenc...
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President Minehan.
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I think Governor Mishkin preceded me.
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We're having questions for Vincent now.
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This is just an intervention.
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I think I had President Poole first and then Governor Mishkin. President Poole.
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Vince, in thinking about the possible benefits of accelerating the release of the minutes, can you name a time when that would have produced a benefit? I understand the cost because we all understand the costs, but I don't know of any case in which releasing the minutes five days earlier would have bought us anything. ...
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The particular cases that I can imagine would be employment reports. If it takes five fewer business days--and that might be a little speedier than the staff can actually deliver--any cutting of those business days, particularly if it gets past that Friday, produces the chance that there would be another employment rep...
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It probably would be helpful if we could have more detail with regard to how that might work and how often those cases would arise because the costs would occur continuously. As you emphasized, there are also some risks to accelerating the minutes because doing so reduces the amount of time to think it all through and ...
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There were a couple of statistics in Debbie's memo in particular about how it interacts with the standard semiannual testimony schedule.
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Another observation somewhat in the same vein--regarding the economic projections, as I commented earlier, we have been thinking about this during a period in which the forecast hasn't changed much. The situation has been pretty benign from the point of view of anybody who has been doing this for very long. One thing t...
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Let me just say that there's going to be a go-round. Everyone will have an opportunity.
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Well, I'm sort of asking him to reflect on that. [Laughter]
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Governor Mishkin, do you have a question?
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Yes, I do have a question--just a clarification. One thing that we talked about early on when you gave us information was that there is the information regarding our views about whether risk was greater or less than usual and about the skewness of the risk. You might also want to include in the documents that would go ...
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Right. I believe the table of uncertainty was one thing that the subcommittee viewed as useful to include, not the three big fat bars that showed uncertainty variable by variable. That was useful background for writing the paragraphs in the narrative that talked about the Committee's perceptions of risks.
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I'm just trying to remember--did the table have the uncertainty for the variables?
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The table had historical variability coming from a couple of different sources.
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The Greenbook and FRB/US.
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Right. That would be a reference table in the write-up. The narrative would say, "In the Committee's view, current uncertainty was about at historical experience." Then in the narrative description of the risks, we'd use the information that you provided about the asymmetries of those risks. I don't think we envisioned...
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Right, but the key idea is that we do have a table with actually some numbers as part of the document. Thank you very much.
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President Minehan. I'm sorry. You had an intervention.
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That's all right. I have one question and a plea. The question is, Have we decided about how many times we're doing these forecasts and I just missed the decision?
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No.
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Will we be meeting four times a year?
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That's what we have to discuss. That's on the table.
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Okay. It didn't seem to fall into this huge list of things. The plea is, Please tell us what you want us to focus on first. There's so much stuff here that goes into the heart of every communication issue that we've talked about over more than the past eighteen months. Do you have in mind a plan of action for which you...
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