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fomc
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Our hope was that we could come close to closure on enhanced projections.
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Okay.
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That led naturally into the minutes because the projection's write-up would be in the minutes. The statement would be put off for a second round, and I personally wouldn't be surprised if we never got to the second round. [Laughter] We could try. I think we should focus first on the projections--what's in them--and the...
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So really to home in on what we all want to see out of the projections is job number one.
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Right. We would like to come out of this with some decisions made about the way forward.
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Okay.
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President Moskow.
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Is the subcommittee making a recommendation on any of these?
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No. All along we've viewed our job as bringing things to the table and helping the FOMC to make the decisions and not making recommendations, and we've stuck with that. Janet is rolling her eyes. [Laughter]
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Vice Chairman.
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This may get us slightly ahead of ourselves, but I think it's important to what we're asked to do now. It makes sense to get people to focus on how comfortable they are with what has been on the table regarding the range of options on projections and to say what they're comfortable with and what they're not comfortable...
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Yes. As Vincent pointed out, we'll have another round, a practice round this time and maybe even another one.
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Are there other questions for Vincent?
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I had, Mr. Chairman, a timing question. Vincent, you said that including the write-up of the projections with the minutes--either as a separate document or integrated--might argue for not shortening the time. But how could we do that with the Chairman's testimony? Doesn't that actually force the shortening of the time?
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Well, I would make a distinction between when the Committee approves the document and when the Committee releases the document publicly. You might not want, for instance, to release the minutes before the Chairman's testimony because it does sort of step on that message.
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I agree with that.
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But if the write-up is in Committee-approved minutes and a Board-approved Monetary Policy Report, you're going to have to figure out a mechanism by which the Committee signs off on the write-up so that it will be the same in the report. The possibilities are that if it is an annex or a drop-in portion of the minutes, t...
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President Pianalto, do you have a question?
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Yes, I have a question on the timing of the Chairman's testimony. Are those dates set by law?
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The law says no later than February 20 and July 20. In practice, the Committee sometimes allows for some slippage. The last few times it has tended to be earlier than that. So that does put a T in terms of your planning horizon. You also have some flexibility about when you schedule the meetings.
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I understand that the doughnut truck has arrived. [Laughter] So give us a twenty-minute break for coffee, and we will continue this discussion.
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Why don't we reconvene? We had some hurried consultation during the break about how best to proceed with this discussion. Breaking with our usual practice, we decided that it might be best for me to begin and to provide you with my sense of a broad schematic of how I see us going forward with our communications, in par...
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I have just a question. In communicating the projections, what are you suggesting there, Mr. Chairman? Is it four times a year that we would put the projections out with commentary?
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Yes.
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Okay. Fine. Thank you.
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Let me give Governor Kohn a chance to lead off as the chairman of the subcommittee, and then we'll have a full go-round. Don.
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Thank you, Mr. Chairman. I agree with and strongly support the path that you've outlined for us for the reasons you've articulated so nicely. Let me add a few things and then give a few specifics. I think this would be a very important contribution to enhancing the understanding of the public, the markets, and the legi...
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That's okay. Thank you. President Lacker.
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Thank you, Mr. Chairman. We were asked to comment on a long list of questions concerning economic projections, the minutes, and the statement. In addition, Governor Kohn has put out the broader question of the general thrust of the direction we're going in, and I'd like to focus my remarks on the latter. Frankly, right...
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Thank you. President Hoenig.
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Mr. Chairman, may I?
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I'm sorry. Vice Chairman.
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So, President Lacker, is it your view that if we're not at this point prepared to announce a quantitative definition of the Committee's long-term objective, that we should not do a third-year projection?
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Yes.
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President Hoenig.
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Thank you, Mr. Chairman. I very much support the proposal that you've outlined here. I think it does not tie our hands as individuals, which was one of my concerns originally. It allows us to do our work as members of this Committee and to put our information out there for our colleagues and for the public to judge, an...
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Thank you. President Moskow.
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Thank you, Mr. Chairman. I, too, want to thank you for putting this proposal on the table. I think it will help this discussion, and I find myself agreeing with everything you recommended actually. I'm a little frustrated. I can't find anything to disagree with. [Laughter] But let me mention a few nuances. On the quest...
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Thank you. President Pianalto.
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Thank you, Mr. Chairman. I, like President Moskow, find it very difficult to find any disagreement with what you propose. I'm very supportive of the approach you've laid out for the reasons that you articulated so clearly. I support extending the forecast period. You mentioned going to a third year; you also suggested ...
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Thank you. President Plosser.
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Thank you, Mr. Chairman. As some others have said, I want to applaud your leadership in laying out a proposal for how we think about this. It's important to have a framework on the table for thinking about where we want to be. I would add that generally I agree with almost everything you said. I think it's a good way f...
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Thank you. Vice Chairman Geithner.
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May I ask a clarifying question before I speak?
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Sure.
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This really goes to the remarks of President Moskow and to the relationship between a narrative to accompany the projections and the description in the minutes. If you did that model, which as I understood it, President Moskow, is to incorporate a narrative as an appendix to the minutes, how then would the description ...
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Obviously, the two would have to be drafted very carefully to make sure that they are in concert and that there are no inconsistencies in them. But I think doing so is clearly manageable because one is a set of longer-term projections and the other is a discussion of the shorter-term outlook.
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So that is the distinction. You would say the minutes are the description of the near-term outlook that underpins our judgment about the decision at the meeting, and the annex would be more of a focus on the description of the medium term?
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Yes, whatever the timeframe is for the projections.
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Governor Warsh.
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Isn't there a third alternative? The minutes are what we actually discussed, and the other thing is a story. I think President Moskow's question really relates to whether or not we are going to try to weave what we actually discussed into some coherent story or try to make the minutes really be what I suspect they were...
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I think I would just note, Vice Chairman Geithner, that Jim Clouse wrote a version of the minutes that did a pretty good job of integrating them. It gave the projections with the long-term overview and the underlying forces, et cetera, and then the rest of the minutes, as is our wont, in sort of a sector-by-sector disc...
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Mr. Chairman, may I ask--was that the draft that Ms. Danker sent around?
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Yes, the appendix to Debbie Danker's memo is the draft that Jim Clouse prepared. I think the Vice Chairman is correct in that, of course, there would be some repetition in the discussion of the minutes just because the sector-by-sector discussion of the near-term conjuncture is going to be somewhat similar to the longe...
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Okay. So, Mr. Chairman, I am very supportive of the path you laid out. I think it basically is the optimal balance today between what the consensus of the Committee will bear now on the merits and what our unique institutional structure as a central bank permits. Now, your view and the Committee's view of that balance ...
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Thank you. President Minehan.
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Thank you very much, Mr. Chairman. I, too, would like to thank you very much for presenting your thoughts at the beginning of this discussion. It was extremely helpful to my thinking through what comments I wanted to make at this meeting. I have also found Governor Kohn, Vice Chairman Geithner, and everybody else who h...
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The Yankees. [Laughter]
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Probably not. Okay. That's it.
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We'll ring you up in retirement. [Laughter]
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How about the Red Sox?
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My prediction is that they will stay in first place through the All-Star break. [Laughter] I think that's safe enough.
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Governor Kroszner.
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Thanks. I also want to say that I am very supportive of what the Chairman and the Vice Chairman said. I really think this threads the needle for getting, as Vice Chairman Geithner said, the right balance. We get to provide more information with greater clarity and greater accountability, and I think it will also lead t...
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Thank you. President Fisher.
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Mr. Chairman, you spoke of the road to Damascus. I was thinking about the movie "What About Bob?"--not because of my own neuroses about this exercise but because I think it is important to proceed with baby steps, step by step. President Minehan's point is cardinal: It's very hard to go back once you move forward. As I...
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Thank you. President Poole.
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Thank you, Mr. Chairman. Clearly, from the discussion so far--and my prediction is that it will continue this way--there is a tremendous amount of support for the outline that you have presented, and I share that. I want to focus on two points that Richard raised and maybe hit them a little harder. First, on the fed fu...
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Thank you. President Yellen.
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Thank you, Mr. Chairman. I strongly support the proposals that you have laid out. I appreciate your doing so. They have helped focus this discussion. Besides agreeing with the proposals, I also agree with the reasoning that you have set out as to why this is the right step and why it is an important step. It doesn't go...
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Thank you. Governor Warsh.
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Thank you, Mr. Chairman. I also think that your straw-man proposal really does strike the right balance, and I strongly support it. We probably owe it to you between now and the fall, or whenever you feel appropriate to be able to go forward with an announcement, to keep our discussion in this room. Our confidentiality...
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President Plosser had an intervention.
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Yes. I just want to make one comment about the issue of the fed funds path. Both Vice Chairman Geithner and Governor Warsh made a comment about the markets. When I hear you talk about the markets, I am struck that it is a very narrow definition of what the markets care about. You are looking at it in the context of wha...
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Thank you. President Lacker.
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If I could just add to that. I had a similar reaction to Vice Chairman Geithner. When we targeted money supply growth, markets reacted to money supply growth figures because they thought we were going to react to money supply growth. If Red Sox victories influence a fed funds rate setting, the market would react to the...
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Perhaps I could say my piece again, just so he didn't misinterpret it. Of course they care about inflation, and of course they care about whether we are going to competently deliver acceptable inflation outcomes over time. My only point was to say that even if you gave them clarity on an objective at a certain horizon,...
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President Minehan.
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I would just like to add a comment in favor of uncertainty for the markets. Uncertainty is important in how markets work. Uncertainty is critical to market participants forming their own views about the future and managing the risks as they see them in the future. Everybody talks about the famous Greenspan put. We know...
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President Lacker.
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I thank Vice Chairman Geithner for clarifying his views. I couldn't agree more that there is a vast range of uncertainty out there about which we can't help markets and they can't help us. We would all like to know more about the future. That is why it is imperative, to me at least, that we focus on resolving the uncer...
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President Stern.
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Well, I, too, strongly am in favor of the direction you have proposed, Mr. Chairman, and the reasons that you laid out for moving in this direction. I would urge us to move as promptly as is practical down this path. I am fairly flexible about many of the specifics that would accompany this path because I think there i...
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Thank you. President Lockhart.
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Thank you, Mr. Chairman. I, too, applaud your putting a concrete proposal on the table. With a Committee of nineteen, and as many moving parts as this could have, we could end up with a camel when we wanted a horse, and therefore having something concrete to react to is very helpful. Having said that, I have looked at ...
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Thank you. Governor Mishkin.
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Thank you, Mr. Chairman. I share many of President Lacker's concerns, but I come to a different conclusion because I strongly support this proposal. It is a major step, but it is incremental. But I'd like to go through some of the issues that President Lacker discussed because I think that they relate to where we may b...
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Thank you, Governor. Well, first of all, let me thank everyone for extremely thoughtful and helpful remarks. We will be looking at them, the staff will be looking at them, we will proceed with this process, and we will try to converge to the document that ultimately will be the one that will be the format that we will ...
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Let us reconvene. Again, thank you for the very useful discussion before lunch. Let me just remind you that we need to keep this discussion within this room. It would be destructive to the whole process if we had it leak out in the next few months. So we appreciate your doing that. The last item of business is just to ...
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As far as the statement now goes, the way I would phrase it is that I can live with what we have. If I may anticipate President Minehan just a little bit, I would like to see it simpler and shorter as we go forward, especially if we can move the minutes closer to the meeting date as we discussed here earlier. That woul...
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Could I add to the governance question the issue of what we vote on as a Committee? Should we vote on the whole statement or just the first and fourth sections as we do now?
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Well, I guess the way I would answer that is I would not change the way we do it now because I'm not sure if it's the first or the fourth section. [Laughter]
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So the practical implication is that it really wouldn't be legitimate if we agree with that to dissent on the description of the economy or inflation.
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That's right.
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If we agree on that--but we will hear what people have to say. Thank you. President Stern.
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Thank you. I'm basically happy with the statement as it is now. It's not exactly where I thought I would come out, honestly. But if you look at it, it's really pretty straightforward and does what it needs to do--by which I mean that it provides a concise, but I would say valuable, rationale for the decision. That has ...
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Thank you. President Poole.
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Thank you. I think the statement is okay. I am a little concerned that we modify it case by case. Today we had this issue about "elevated" or "somewhat elevated" and how would we change that without giving a message that we don't intend. I don't know whether we can craft language that would avoid that sort of case-by-c...
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Thank you. President Pianalto.
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Thank you. I'm basically happy with the statement the way it is now. Like President Stern, I was leaning on the side of making it shorter, but when I started to look at where I would cut, it was very hard to come up with places to cut. I don't think that adopting some of the changes that you outlined earlier will short...
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