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fomc | 2,008 | I am the new guy, but I will just put in my two cents here. Everyone seems to agree that there is no quantitative impact. I can't see any quantitative impact. There are political implications. I don't see why we are doing it. | 49 |
fomc | 2,008 | To repeat what Bill said, I think it is hard to measure the quantitative impact, but my guess is that there is some. But the point is well taken. What I would like to do is go through the first votes, and then we will take a straw vote on the TSLF, and then decide what to do. Okay? First, we have to ratify domestic ope... | 81 |
fomc | 2,008 | So move. | 3 |
fomc | 2,008 | No objection? Okay. Now the swap agreements with Canada and Mexico. | 14 |
fomc | 2,008 | So move. | 3 |
fomc | 2,008 | Is there anyone who wants a roll call on this? Okay. If not, then no objection. Extend and expand the swap agreement with the ECB. | 30 |
fomc | 2,008 | So move. | 3 |
fomc | 2,008 | Is there anyone who wants a roll call on this? Okay. Then, without objection. Expand and extend the swap agreement with the Swiss National Bank. | 30 |
fomc | 2,008 | So move. | 3 |
fomc | 2,008 | Without objection. Okay. Now, on the TSLF, the proposal is to include this as part of the package. There will be no change to the facility except for the increase in the collateral range, to include AAA asset-backed securities. Are there any further comments on this? I am going to ask for a straw vote, just to get a se... | 102 |
fomc | 2,008 | Are you asking voters only? | 6 |
fomc | 2,008 | I'm sorry? | 3 |
fomc | 2,008 | Are you asking voters only or the entire table? | 10 |
fomc | 2,008 | I would like to get a sense of all participants, if that is okay. Thirteen participants are in favor. All right. All participants against? Okay. Let's go ahead and take a vote on this, then. Is there anyone who wants a roll call vote? If not, then no objection. | 61 |
fomc | 2,008 | So move. | 3 |
fomc | 2,008 | No objection. Thank you. Let's turn now to the economic situation. Dave Stockton. | 17 |
fomc | 2,008 | Nathan and I thought that we would alter slightly the structure of our briefing today so as to focus a bit more closely than usual on the global and domestic outlooks for inflation. I'll start with a brief review of recent economic developments and our outlook for economic activity in the United States. Nathan will the... | 1,514 |
fomc | 2,008 | Much as Dave just described for the domestic economy, our forecast for economic activity abroad also is little changed from the last Greenbook. Recent data have come in consistent with our view that the slowdown in U.S. activity and the ongoing financial turbulence will leave an unmistakable imprint on economic growth ... | 1,795 |
fomc | 2,008 | Before explaining how the global developments that Nathan just described intersect with our domestic inflation forecast, I should briefly review some of the incoming information on prices. For the most part, the recent consumer price data have been running below our expectations. At the time of the March Greenbook, we ... | 1,550 |
fomc | 2,008 | 2 I will be referring to the package labeled "Material for Briefing on FOMC Participants' Economic Projections." Table 1 shows the central tendencies and ranges of your current forecasts for 2008, 2009, and 2010. Central tendencies and ranges of the projections published by the Committee last February are shown in ital... | 1,160 |
fomc | 2,008 | Thank you very much. Are there questions for our colleagues? President Evans. | 15 |
fomc | 2,008 | Thank you, Mr. Chairman. The Greenbook is aggressive and effective at portraying the U.S. economy as being in a mild recession. They've overcome the statistical evidence, which often prevents us from forecasting a recession since they are mostly surprises. There's a nonlinear step-down in the second quarter that begins... | 189 |
fomc | 2,008 | This year certainly is pretty close to a jobless year in terms of a full year of nothing but employment declines and then fairly modest employment gains next year. But the principal reason we didn't predict a pattern like the one we saw in the earlier part of this decade is that we don't think we're going to get the ki... | 202 |
fomc | 2,008 | Thank you. That's a fair point. | 8 |
fomc | 2,008 | President Stern. | 3 |
fomc | 2,008 | Dave, I have a couple of questions. One is technical, and one is a little more substantive. The technical one is that you have a very sharp decline in consumer spending on services in the fourth quarter of this year and then not much of a recovery in the first quarter of next year. I assume something special is going o... | 76 |
fomc | 2,008 | What was going on there was probably--I don't know if it was rational or irrational--inattention. But in looking at that over the weekend, it seemed like something that should not be considered as an analytical feature of the forecast. Just in terms of the falloff in consumption that we expect to follow from the end of... | 92 |
fomc | 2,008 | "Services" seems like the least likely spot actually. | 11 |
fomc | 2,008 | I think I'm raising the white flag here. [Laughter] | 13 |
fomc | 2,008 | Well, sorry. The more fundamental question is that I have been trying to get comfortable with an outlook that would have core inflation leveling off and maybe declining a bit, and that's the forecast I have. But I took your presentation, which I think was certainly on the right topic, to say that the risks around the c... | 80 |
fomc | 2,008 | I think that is a fair characterization. You know, one thing that we're struggling with--and I assume you are as well in giving your own views about the uncertainty and the skewness around your forecast--is whether things have changed. Is the skew large enough for us to argue that, in fact, the risks look unbalanced? W... | 199 |
fomc | 2,008 | Thank you. | 3 |
fomc | 2,008 | President Fisher. | 3 |
fomc | 2,008 | Nathan, both you and Dave expressed the frustration that I think all of us have about relying on futures markets in terms of our forecast of lower prices. It just hasn't been very helpful. Do we know or have a sense of how OPEC itself forecasts? Do they just look at futures markets? Second, to what degree do you impute... | 276 |
fomc | 2,008 | It is, quite frankly, pretty tough to get a straight and compelling answer out of the OPEC folks about how they think about the oil markets. A number of us have sat in international meetings and listened to various explanations. In fact, at one recent meeting in Basel, the representative from Saudi Arabia indicated tha... | 816 |
fomc | 2,008 | Thank you for that long and thoughtful answer. | 9 |
fomc | 2,008 | President Plosser. | 5 |
fomc | 2,008 | Thank you, Mr. Chairman. I have two questions. One, in comparing the staff's forecast with a lot of the private-sector forecasts--what it looks like and its shape--one thing that is striking about the forecast is the very large adjustment swing that occurs in inventories. My interpretation is that one thing that is occ... | 358 |
fomc | 2,008 | Your intuition on that last point is correct. Obviously, in that simulation we have inflation expectations deteriorate a little more from where we think they have deteriorated already over the past year or so. Again, this is really hard to pin down, but we think there has probably been an increase of maybe 1/4 percenta... | 179 |
fomc | 2,008 | A lot bigger than just the rise in expectations. | 10 |
fomc | 2,008 | A lot bigger than just the rise in expectations, and the fed funds rate, of course, would have to rise considerably. On the inventory side of the forecast--again, you put your finger on the principal reason that inventories are as weak as they are in the near term, which is that we think there will be a pretty sizable ... | 398 |
fomc | 2,008 | In the theoretical literature there is a lot of discussion about inventory modeling now and what the appropriate way is to think about it. | 25 |
fomc | 2,008 | I think I can assure you that our models of inventory investment are not very good. | 17 |
fomc | 2,008 | But they don't take information and convert it into noise. [Laughter] Other questions for our colleagues? President Lockhart. | 25 |
fomc | 2,008 | Thank you, Mr. Chairman. Just to follow that up, Dave, how do you build your assumption on the spending response to the fiscal stimulus? | 30 |
fomc | 2,008 | That was based on our reading of the literature, especially of the last episode of fiscal stimulus, which was associated with the rebate package in the earlier part of the decade. We're assuming a marginal propensity to consume out of those rebates of about 1/2--that seems reasonably in line with what the literature su... | 111 |
fomc | 2,008 | President Plosser. | 5 |
fomc | 2,008 | Yes, just a follow-up. Another way to ask my question is, Given your assumptions about the fiscal policy stimulus and tax rebates, if I took the view that your estimate of spending was not really 50 cents, 40 cents, or 60 cents but really 10 cents--most of it will get saved and not spent--how would that affect your inv... | 87 |
fomc | 2,008 | Roughly, we're offsetting about half the spending through the inventory drawdown, so you could basically take that. If you took away a significant fraction of the spending, we'd take away a significant fraction of the inventory liquidation, and the GDP effects would be moderated considerably. | 55 |
fomc | 2,008 | Other questions? If not, let's start our go-round. President Evans. | 15 |
fomc | 2,008 | Thank you, Mr. Chairman. I was pleasantly surprised that we have not had any major downside surprises since our March 18 meeting. So while I still recognize the economy's downside risks, I've become less comfortable about signing onto the Greenbook's judgment that a nonlinear step-down in activity currently is in train... | 929 |
fomc | 2,008 | Thank you. President Plosser. | 8 |
fomc | 2,008 | Thank you, Mr. Chairman. In the Third District, there has been little change in economic activity since I reported in March. Business activity remained weak over the intermeeting period but no more or less than anticipated and than we reported in our March meeting. Manufacturing activity, residential construction, and ... | 1,705 |
fomc | 2,008 | Thank you. President Yellen. | 7 |
fomc | 2,008 | Thank you, Mr. Chairman. In looking at the latest Blue Chip forecasts for GDP growth, I noted that the range between the highest and lowest is among the largest on record. The 10 most optimistic forecasters are predicting over 21/2 percentage points faster Q4-over-Q4 growth than the 10 most pessimistic ones. Such forec... | 1,194 |
fomc | 2,008 | President Fisher. | 3 |
fomc | 2,008 | Mr. Chairman, I want to focus my comments today on what I have heard from my CEO contacts. With regard to my District, it continues to do well relative to the rest of the country, but it is not immune to the pathology that is afflicting the overall economy. Although still positive, economic growth and employment creati... | 2,121 |
fomc | 2,008 | That made me dizzy. [Laughter] President Rosengren. | 14 |
fomc | 2,008 | Thank you, Mr. Chairman. Without judgmental adjustments, the Boston Fed forecast is somewhat more optimistic than the Greenbook. As in the Greenbook, our GDP is weak in the first half of this year, though neither of the first two quarters actually turns negative. Our slightly more optimistic forecast assumes that consu... | 875 |
fomc | 2,008 | Thank you. President Lockhart. | 7 |
fomc | 2,008 | Thank you, Mr. Chairman. Our high-level view of current circumstances is that the real economy is quite weak, with weakness widespread. The financial markets are turning optimistic, and elevated prices and inflation remain a serious concern. Reports from our directors and District business contacts were broadly similar... | 933 |
fomc | 2,008 | Thank you. President Bullard. | 7 |
fomc | 2,008 | Thank you, Mr. Chairman. The economy of the Eighth District continues to show signs of weakness. The services sector has continued to soften, and sales of both general and big box retailers are down from the same period last year. The residential real estate sector has continued to decline throughout the District. Acro... | 734 |
fomc | 2,008 | Thank you. Why don't we take a break for coffee and return at 4:45. Thank you. [Recess] | 26 |
fomc | 2,008 | Why don't we reconvene. President Pianalto, whenever you are ready. | 15 |
fomc | 2,008 | Thank you, Mr. Chairman. Regardless to whom I talk with these days, the conversation quickly turns to both the fragile condition of financial markets and the spectacular rise in energy and commodity prices. I had hoped that one of these problems would have gone away by now, but clearly that is not how conditions have u... | 706 |
fomc | 2,008 | Thank you. President Hoenig. | 7 |
fomc | 2,008 | Thank you, Mr. Chairman. Economic activity continues to be slow in the Tenth District with a soft tone in our residential and nonresidential construction and certainly in our retail sales. Mitigating this weakness, however, to some extent is continued strength in energy and agriculture exports and, to a lesser degree, ... | 949 |
fomc | 2,008 | President Lacker. | 4 |
fomc | 2,008 | Thank you, Mr. Chairman. Fifth District economic conditions softened further in recent weeks. Following a pop-up in March, our manufacturing contacts said that factory activity lost momentum in April. Services firms that we surveyed again reported tepid growth in their revenues, and retail sales continued to be very we... | 1,238 |
fomc | 2,008 | President Stern. | 3 |
fomc | 2,008 | Thank you, Mr. Chairman. Well, for some time I have been using the headwinds period of the early 1990s as a frame of reference for thinking about credit conditions, economic growth, and inflation prospects for the next several years. I won't belabor that comparison much this afternoon, except to say that I continue to ... | 456 |
fomc | 2,008 | Thank you. Vice Chairman Geithner. | 9 |
fomc | 2,008 | Thank you, Mr. Chairman. In terms of markets, Fed credibility, and negative surprises on the data relative to our forecasts, I think this has been the best intermeeting period in a long time. The markets reflect increased confidence that policy will be effective in mitigating the risks both of a systemic financial cris... | 1,261 |
fomc | 2,008 | Thank you. Governor Kohn. | 7 |
fomc | 2,008 | Thank you, Mr. Chairman. My forecasts of output and inflation for this and the next two years are in the central tendencies of the Committee forecasts. My Okun's law machine went haywire under the pressure of Debbie's deadline, [laughter] so my unemployment forecasts need to be revised. But I hit the 5:00 deadline, I t... | 1,751 |
fomc | 2,008 | Thank you. Governor Warsh. | 7 |
fomc | 2,008 | Thank you, Mr. Chairman. As has been described by most around the table, official data on the real economy suggest weakness but haven't materially changed since we met in mid-March. Others have talked in more detail about weakening labor markets, poor consumer sentiment, and worrying trends in consumer spending. Certai... | 1,087 |
fomc | 2,008 | Thank you. Governor Kroszner. | 9 |
fomc | 2,008 | Thank you very much. As I have talked about many times before, I see what is happening as a continuing slow burn after the fires really heated up for a little while back in March. Things have cooled off again. But exactly as Governor Kohn said, we now seem to be comforted at levels that caused us extreme distress last ... | 1,597 |
fomc | 2,008 | Thank you. Governor Mishkin. | 7 |
fomc | 2,008 | Thank you, Mr. Chairman. My modal forecast is for a mild recession in the first half of 2008 and is very much in line with the Greenbook forecast. I am more pessimistic, however, than the Greenbook on the issue of recovery. Again, the issue is that we have had a major disruption to our financial markets and there is a ... | 931 |
fomc | 2,008 | What is wrong with "Desperate Housewives"? [Laughter] | 13 |
fomc | 2,008 | But I do have a concern about the risk to inflation expectations because of the high commodity prices that we see. This is coming from the very adverse supply shock and the fact that we have had headline inflation so high for so long. The good news, by the way, is that it is actually quite remarkable, given how high he... | 258 |
fomc | 2,008 | Thank you, and thank you all for very helpful comments. As usual, let me briefly summarize what I heard today and then make a few comments of my own. Again, in summary, data since the March meeting have been soft, and economic activity is weak. But the recent news has not generally been worse than expected. There was d... | 2,783 |
fomc | 2,008 | Mr. Chairman, I was wondering if Brian or Bill wanted to talk President Plosser out of his concern about MZM at some point. | 29 |
fomc | 2,008 | If you like, I could try to address that tomorrow. | 12 |
fomc | 2,008 | We'll have a special session on MZM. [Laughter] | 13 |
fomc | 2,008 | 3 I will be referring to the revised version of table 1, which is included in the package labeled "Material for the FOMC Briefing on Monetary Policy Alternatives." The revised table presents the same range of options regarding the target federal funds rate as the version discussed in the Bluebook, but we have proposed ... | 2,264 |
fomc | 2,008 | Thank you. Are there questions for Bill? | 9 |
fomc | 2,008 | Mr. Chairman? | 4 |
fomc | 2,008 | President Fisher. | 3 |
fomc | 2,008 | You emphasized the phrase "reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization." Can you just refresh my memory? For how long have we been using that phrase--just in the March statement, or have we used it before? | 56 |
fomc | 2,008 | I'm afraid I'm not sure. | 6 |
fomc | 2,008 | We must have used that just in March. It was not here in January. | 16 |
fomc | 2,008 | Definitely March. January was minimalist. | 7 |
fomc | 2,008 | So not in January--it was just in March that we used that. Second, let's say we were to have a rally in the dollar. If we voted for no change, might that positively affect equity prices or the credit markets in the United States? Is it possible? | 55 |
fomc | 2,008 | I suppose it's possible, but I guess I would expect that, if monetary policy came out tighter than people had expected, it would lead to at least a modest marking-down of the outlook for the economy. | 41 |
fomc | 2,008 | For how long? This is a personal view, but it's not clear to me that things are that clear-cut on a sustainable basis. One of the things that seems to be undercutting confidence is the weakness in the dollar, even though in the past few days the dollar has rallied. I'm just wondering if it's clear-cut that we would nec... | 118 |
fomc | 2,008 | I think it's hard to know how people would read the news. But as was emphasized earlier, a weaker dollar supports exports and supports the outlook for the real economy. | 33 |
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