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fomc | 2,007 | I have a process question. In this go-round, are we going to talk just about the policy decision in the statement, or are we supposed to include the discussion of the projections? | 37 |
fomc | 2,007 | It's a separate agenda item. | 6 |
fomc | 2,007 | So it will be a separate discussion. That's what I thought. Okay. | 15 |
fomc | 2,007 | Yes. Are there any other questions for Brian? If not, President Lacker. | 17 |
fomc | 2,007 | Thank you, Mr. Chairman. While the intermeeting period has seen a mix of good news and bad news, a substantial amount of good news, the net effect on my near-term outlook, as I said yesterday, has been negative, stemming largely from the continued slide in housing. I have come around to the view that the slump in housi... | 412 |
fomc | 2,007 | I stand by that. | 5 |
fomc | 2,007 | That would be intrepid of you. | 8 |
fomc | 2,007 | Well, I'm hoping that inflation drifts down enough so that pessimists about adjustment costs will swing around to endorsing a lower numerical objective for inflation. If we see signs of firming inflation or firming growth early next year, I would hope for a firmer policy stance accompanied by appropriate communications... | 95 |
fomc | 2,007 | Thank you. President Hoenig. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I'll take just a second here because I realize how difficult today's decision is and that it involves balancing contrasting and rather elevated risks. One risk is that the current housing and financial environment will cascade the real economy immediately into a slowdown, and that would cost ou... | 849 |
fomc | 2,007 | I'm sorry. You prefer C-4 to B-4, is that what you said? | 19 |
fomc | 2,007 | I do. | 3 |
fomc | 2,007 | Including the balanced risks? | 5 |
fomc | 2,007 | Well, what I really prefer is that we go back to our last statement but say, "Financial markets obviously remain uncertain, and we will watch them. Thus . . .," and then bring in "the Committee will continue to assess the effects of financial and other factors," without the downside risk. | 60 |
fomc | 2,007 | So that is basically the September assessment. | 8 |
fomc | 2,007 | Exactly. | 2 |
fomc | 2,007 | Thank you. Governor Kohn. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I agree with President Hoenig that this is a difficult decision between staying where we are--and I would have downside risks to growth on that--or moving 25, but with more-balanced risks. I think it's difficult--we are balancing a number of very difficult things here. On the one hand, the inco... | 814 |
fomc | 2,007 | Thank you. President Lockhart. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. One of my life-long purposes has been to make the world safe for ambivalence and indecision. [Laughter] | 31 |
fomc | 2,007 | How is that going? | 5 |
fomc | 2,007 | Well, I'm gaining ground this morning. [Laughter] Having said that, I prefer that we reduce the federal funds rate target 25 basis points. My thought process is that the softening of economic activity, at least in some sectors, and the lower estimates suggest that the neutral rate of interest may be falling. The downsi... | 528 |
fomc | 2,007 | Thank you. President Poole. | 7 |
fomc | 2,007 | Mr. Chairman, thank you. Two weeks ago I was pretty adamant in my own mind that the recommendation I would be offering was no change, but I have reluctantly tilted in the other direction and favor a 25 basis point cut. I have changed my mind because of really two things. First, in my discussions with our directors, in ... | 889 |
fomc | 2,007 | Thank you. President Plosser. | 8 |
fomc | 2,007 | Thank you, Mr. Chairman. The last time we sat around this table, I and many of you argued for what the markets described as a surprisingly aggressive 50 basis point rate cut. At that time, the baseline Greenbook forecast was for 25 basis points, 25 in subsequent meetings, and then flat thereafter. Our rationale was tha... | 1,874 |
fomc | 2,007 | Thank you. | 3 |
fomc | 2,007 | Mr. Chairman? | 4 |
fomc | 2,007 | Yes, Vice Chairman. | 5 |
fomc | 2,007 | Let the record show I am asking this with a smile. President Plosser, you are not really suggesting that your colleagues, if they have evolved in their view, are undisciplined, unsystematic, or capricious in their rationale for that evolution, are you? | 58 |
fomc | 2,007 | No, I am just saying that the communication of that rationale is tricky, and I did say that people are making their best efforts to make their forecast. I explained my view of how I discipline my forecast and how I discipline my policymaking. | 49 |
fomc | 2,007 | Just to clarify about the submission you presented--you have, as I think you said yesterday, a 25 basis point cut early in the year, in the first quarter? | 35 |
fomc | 2,007 | First quarter perhaps, but that was conditioned on inflation and inflationary expectations remaining well behaved. | 18 |
fomc | 2,007 | Thank you. | 3 |
fomc | 2,007 | President Yellen. | 4 |
fomc | 2,007 | Thank you, Mr. Chairman. I found the choice between alternatives A and B to be a tough call. I've struggled with this over the past week, and in the end I find the arguments for alternative A for a 25 basis point rate cut more persuasive. I have several reasons for this judgment. First, as I argued yesterday, further a... | 822 |
fomc | 2,007 | Thank you. President Rosengren. | 8 |
fomc | 2,007 | Thank you, Mr. Chairman. I, too, find myself torn between alternative A and alternative B and have been anguishing over them much of the last week figuring out where I come out. The economic outcome detailed in both Boston's and the Board's forecasts with no change in interest rates seems reasonable. The evidence since... | 552 |
fomc | 2,007 | President Lacker. | 4 |
fomc | 2,007 | If the language in alternative A, section 4--the assessment of risk--were simply about the likelihood of rate changes in either direction and didn't say anything about growth and inflation, would you view that as inconsistent with the assessments in our projection? | 49 |
fomc | 2,007 | No. If the goal is to try to convey that we aren't necessarily going to cut rates again, that is different from an assessment that there's a downside risk that housing will get much worse. So whatever we put in that should reflect what we actually want to convey and certainly shouldn't be inconsistent with histograms t... | 71 |
fomc | 2,007 | I asked this, Mr. Chairman, because I've said this before on a couple of occasions: The awkwardness about the assessment of risk statement is that it talks about rates but it talks about them using a code about growth and inflation rather than talking about the rates themselves. | 54 |
fomc | 2,007 | Just for clarification--and, Brian, you can correct me--we are not going to publish the histogram showing the risks. We will describe verbally, generally speaking, the Committee's views. President Evans. | 41 |
fomc | 2,007 | Thank you, Mr. Chairman. I find myself in agreement with so many things that have been said already, no matter how the conflict may appear. This is a close call. I think it's a tough decision. I have, frankly, gone back and forth in thinking about the nuances here. It is the case that the data have been better than I e... | 920 |
fomc | 2,007 | Thank you. Governor Mishkin. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I take the view that a cut today is justified on the basis that keeping rates where they currently are leaves us with a lot of downside risk. That's exactly what I've been hearing from other people. If there is, in fact, downside risk, why not move today? I would be very troubled by not changin... | 1,447 |
fomc | 2,007 | Thank you. It's a little past 10:30. Coffee is available. Why don't we recess until 11:00? Thank you. | 29 |
fomc | 2,007 | Let's recommence with President Fisher. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. Flying home last time I thought it would have been nice to have been at the Bank of China and cut 371/2 basis points. [Laughter] I don't want to repeat what has already been said at the table because so much has been said. But it is important to note that, since we last met, the data on the eco... | 561 |
fomc | 2,007 | Thank you. President Pianalto. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I, like several of my colleagues who have gone ahead of me, find myself torn between alternatives A and B. I also wrestled with many of the issues that President Plosser articulated so well. I left our September meeting thinking that the 50 basis point cut pretty much put us close to where we n... | 542 |
fomc | 2,007 | Thank you. President Stern. | 6 |
fomc | 2,007 | Thank you, Mr. Chairman. As I commented yesterday, I think there's a respectable chance that by the middle of next year or so the economy will be growing again at a reasonable rate, and because of the lags between our actions and their effects on the economy, there is not a lot we can do about what happens in the inter... | 685 |
fomc | 2,007 | Governor Mishkin. | 4 |
fomc | 2,007 | Gary, I'm a little puzzled here. I'm not sure I understand. What I understand from your reasoning is that the key issue is that you don't want to give an impression that we are going to keep on cutting. | 43 |
fomc | 2,007 | That's right. | 3 |
fomc | 2,007 | So if you take that first phrase out, you've taken out any issue of balance of risk. My view is that the markets would interpret this as actually indicating that the Committee would be more likely to cut in the future. | 44 |
fomc | 2,007 | Well, I don't know. If you look at the language from the last meeting, we were careful not to pre-commit to anything, and it seemed to me that the markets understood the data dependence. I forget the precise numbers, but I guess the probability of a 1/4 percentage point cut ranged from 30 percent to 100 percent, or mor... | 108 |
fomc | 2,007 | But in this case, if we do alternative A, we will have cut. | 16 |
fomc | 2,007 | Well, I don't follow that. We cut even more significantly at the last meeting. | 17 |
fomc | 2,007 | Thank you. | 3 |
fomc | 2,007 | Governor Warsh. | 4 |
fomc | 2,007 | Thank you, Mr. Chairman. Let me be the most recent but, I guess, not the last to say that this is a close call. I suppose I take more comfort in that than some around the table because I am pleased at the progress though it is not perfect and we're not even back to an honest view of normal in the financial markets. Tha... | 818 |
fomc | 2,007 | Thank you. Governor Kroszner. | 9 |
fomc | 2,007 | Thank you. As I discussed yesterday, I take very much a risk-management approach. But I also like the way that President Evans characterized that risk-management approach as your having to think about the costs and the benefits and very much focus on the potential costs. So in thinking about the best way to go, I think... | 854 |
fomc | 2,007 | Thank you. Vice Chairman. | 6 |
fomc | 2,007 | Thank you, Mr. Chairman. I think the economy is slowing. Even the nonhousing part of the economy is slowing a bit. Housing prices are still obviously sliding down. We don't really claim to know much about where they're going to end up or where we are in that process, but it seems that they are falling and probably at a... | 1,296 |
fomc | 2,007 | Thank you. Thank you all. Well, it has been said many times, but this is very, very close, and I've thought about it quite a bit, obviously. I have a lot of sympathy for President Plosser's very clear analysis. There have been good data since the last meeting. We have talked about the importance of spillovers. We have ... | 947 |
fomc | 2,007 | With the Mishkin amendment or without? | 8 |
fomc | 2,007 | What exactly was the Mishkin amendment? | 8 |
fomc | 2,007 | It was to add a phrase before the downside risks to growth to say, "The Committee judges that the upside risks to inflation roughly balance the somewhat reduced downside risks to growth." It would give a flavor that, in fact, our actions have reduced the downside risk. | 53 |
fomc | 2,007 | I worry about that. For example, by saying that the action "should help forestall" instead of "is intended to forestall" I think we address that. | 34 |
fomc | 2,007 | I didn't feel strongly about this. It was just maybe I'll do it in speeches afterward. | 18 |
fomc | 2,007 | The other comment that came up, I think President Hoenig and President Stern mentioned it, is not exactly softening but emphasizing the uncertainty that surrounds our judgment. So another possibility, and I have always regretted making suggestions on the statement, is that we could take the first sentence from the Sept... | 154 |
fomc | 2,007 | I think the problem with that is that developments of financial markets on balance since the last meeting have been reassuring. The panic has receded. The disruptions are more contained, and so I don't think that works. | 42 |
fomc | 2,007 | Okay. I withdraw that. Any other comments? All right. If not, Ms. Danker will call the roll. Let's just note for the record that for the first time we will be voting on the entire statement. | 45 |
fomc | 2,007 | I will start with the directive from the Bluebook. The language is as follows: "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 ... | 151 |
fomc | 2,007 | Thank you very much. I need to have the Board for a moment. | 15 |
fomc | 2,007 | Let me just address quickly the last item on the agenda, which is communications. On October 19, you received a memo from the subcommittee that describes the latest round of changes to the projections. I won't repeat what they are, but if there are questions, we can take them. I don't believe we received any comments o... | 222 |
fomc | 2,007 | It was not changed from what you received. I have extra copies if you need one. | 18 |
fomc | 2,007 | All right. If anyone needs a copy, Michelle is happy to give you one. I would talk in general terms about this approach, why we're doing it, what the implications are, and so on. I'd be happy to share my draft remarks with anyone who would like to look at them. Let me be clear--I do not plan to reveal any of the data f... | 114 |
fomc | 2,007 | Your speech is November 14? | 7 |
fomc | 2,007 | My speech is November 14, and the release of the minutes will be on November 20. That would give people some time to digest the ideas. Yes? | 33 |
fomc | 2,007 | And the press release? | 5 |
fomc | 2,007 | The press release would be on the morning of November 14 before my speech. On previous occasions when the FOMC has announced communication changes, they have followed the meeting by some weeks. It's not unusual for that to happen. There are questions about timing, whether we should think about doing it later. We had so... | 351 |
fomc | 2,007 | I have two comments. Brian talked about the skewness, which I gather we are going to describe in words but not use the histogram. I have the following question about the skewness. I was one of those who said "broadly similar," and here's how I would look at it. You start with some point estimate. Let's make it simple--... | 566 |
fomc | 2,007 | Well, let me say first on the mode and the median, you make a good point on the first issue about risks. The question to ask yourself is, Given your most likely forecast, on which side are the largest and most costly deviations most likely to occur. In which direction are the risks skewed? That is the way to think abou... | 71 |
fomc | 2,007 | Well, I would keep separate the cost from the distribution itself. | 13 |
fomc | 2,007 | No, I don't think so. I think you ought to put in some costs-- | 17 |
fomc | 2,007 | I'm not saying I would ignore the costs, but maybe we need to be clear about what this probability distribution is supposed to mean. I thought that this was supposed to mean simply the weights that I would give on various possible outcomes in terms of the probability that the forecast might be 1 percentage point below ... | 158 |
fomc | 2,007 | Okay. I think that the answer would be pretty similar in either case. So we can discuss this at another time. On your second question, I think I'm kind of a special case because people will overweight what I say if I give a number. So I would not give a number, and what I would say is that what matters are the views of... | 205 |
fomc | 2,007 | Well, it won't really matter very much with me because I will be out of here before too long, but I have long been on record as bringing the number down, and so I can't back off that. That's what I believe, and so I'm going to keep that. | 55 |
fomc | 2,007 | That's fine. | 3 |
fomc | 2,007 | But I'll disappear from the calculus next spring anyway. | 10 |
fomc | 2,007 | President Fisher. | 3 |
fomc | 2,007 | Mr. Chairman, I appreciate your answer. The one worry I have had about this exercise, which is much better the way it is now expressed and presented--I think it is ready for prime time--is that we might be divided as to our individual instincts. We do operate as a Committee. We have said this a million times, but I'd l... | 129 |
fomc | 2,007 | President Lacker. | 4 |
fomc | 2,007 | No comment. | 3 |
fomc | 2,007 | Anybody else? President Lockhart. | 7 |
fomc | 2,007 | Has there been any reaction to the Greg Ip story? Have we received any feedback from the principal audience for the projections? | 24 |
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