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fomc | 2,008 | I think we wouldn't do things differently to any meaningful degree. | 12 |
fomc | 2,008 | Other questions? I think it might be helpful to flag just a few things about which I would particularly appreciate the Committee's advice. The first is the issue that President Plosser was discussing, which is alternative A--not specifying a range or a target--or alternative B--specifying a range. I think that the argu... | 434 |
fomc | 2,008 | Mr. Chairman, just one response to President Lacker's and President Plosser's observations, which I think are related. If you set the rate that we are going to pay for interest on reserves the same as the target rate for fed funds and the market does repair itself and resume, then you would expect there to be some risk... | 133 |
fomc | 2,008 | Thank you. All right. Let's begin the go-round. We'll begin with President Rosengren. | 20 |
fomc | 2,008 | The bleak outlook calls for aggressive action. With the effective federal funds rate already well below our target, there is a logic to moving to the floor at this meeting and redirecting attention to nontraditional policies. Thus, I am comfortable with alternative B and would reduce the interest rates on required and ... | 172 |
fomc | 2,008 | Thank you. President Bullard. | 7 |
fomc | 2,008 | Thank you, Mr. Chairman. I support alternative A, so let me just talk for a few minutes about what I like about it. I like the language "not useful to set a specific target for the federal funds rate" in alternative A because I think this will begin the process of getting the private sector to think in alternative term... | 1,089 |
fomc | 2,008 | Thank you. President Lacker. | 7 |
fomc | 2,008 | Thank you, Mr. Chairman. Given the dismal state of the economy, and with the funds rate averaging around 1/8 percent anyway, I don't see any reason to wait to bring the fed funds rate down to effectively zero. I agree with the staff analysis that any dislocation of the money funds is likely to be minor. My board put in... | 116 |
fomc | 2,008 | That is going around. [Laughter] | 9 |
fomc | 2,008 | So I support alternative A. I think it makes sense to deemphasize the funds rate target. For reasons that were illuminated by Brian earlier and reasons that Governor Duke alluded to as well, I don't think a target range is useful. We don't want to discourage hope among our community bankers that we might get above 1/4 ... | 1,283 |
fomc | 2,008 | Jeff, I just want to make a couple of comments. A very small one is that, in an early draft, instead of saying "entail the use of the Federal Reserve's balance sheet" we had "entail increasing the size of the Federal Reserve's balance sheet." We thought that might not be appropriate because things go on and off. | 70 |
fomc | 2,008 | Other things pull it down. | 6 |
fomc | 2,008 | Right. We were probably going to do that as a trend, maybe not day to day, but it has some of the flavor of increasing the base. So that is one just observation. On the TALF, we have added a presentation today from Bill Dudley and Pat Parkinson. | 57 |
fomc | 2,008 | Excellent. Thank you. | 5 |
fomc | 2,008 | Finally, on the directive, there is a bit of a difference, which is that I do think we need to bring new programs, et cetera, for your information, as I said before. But this is actually a stronger statement in that it also means that we should report to you on the ongoing implications of existing programs for the base... | 87 |
fomc | 2,008 | Thank you. Mr. Chairman, I do like the "increase" statement, and I think we could easily explain that we are looking at a partial differential effect. | 33 |
fomc | 2,008 | All right. One possibility is "entail increasing the size." There is some risk there, but I think that would be the general trend that we are considering. Others can comment. | 37 |
fomc | 2,008 | I think the real issue is what happens to the CPFF, what happens to the swap programs, and the take-up of the TAF. Those are the three big elements, and they conceivably could run down in the first quarter. | 49 |
fomc | 2,008 | You could say "increasing over time the size" or something like that. | 16 |
fomc | 2,008 | Or "likely to." | 5 |
fomc | 2,008 | Yes. That was the reason we switched. | 9 |
fomc | 2,008 | The statement doesn't have to stand for the whole first quarter, does it? | 15 |
fomc | 2,008 | No. But I think the issue is that, because we have open facilities, we just can't guarantee what their take-up is going to be relative to what they are today. The swap lines are roughly $600 billion; those could come down. | 49 |
fomc | 2,008 | Well, each facility makes the balance sheet bigger than it otherwise would be. | 15 |
fomc | 2,008 | A lot of these could go down quite substantially if conditions improve, and we wouldn't control that. | 19 |
fomc | 2,008 | Right. That was the concern we had--that it wouldn't necessarily be a monotonic increase, that it could have ups and downs depending on usage and so on. | 33 |
fomc | 2,008 | Well, I have in mind here the confusion that some around this table have reported hearing from the public about what we are doing with our balance sheet. I think acknowledging that it is expanding in size would be an important feature. | 45 |
fomc | 2,008 | All right. Well, we can hear from others about that as well. President Evans. | 18 |
fomc | 2,008 | Thank you, Mr. Chairman. I certainly agree that more accommodation is needed. We need to take actions to provide, as best we can, the quantitative easing equivalent of the optimal control path as discussed in the briefing. I am not sure ultimately how feasible that will be, but it is a good goal for us over the next fe... | 618 |
fomc | 2,008 | Thank you. Governor Kohn. | 7 |
fomc | 2,008 | Thank you, Mr. Chairman. Like the others who have spoken before me, I think this situation is very serious. We need to do all we can, and I think we need to recognize the reality of where we are. So either alternative A or alternative B does that to a significant extent. I guess I have a slight preference for alternati... | 1,149 |
fomc | 2,008 | Thank you. | 3 |
fomc | 2,008 | Mr. Chairman? | 4 |
fomc | 2,008 | Yes. | 2 |
fomc | 2,008 | Just a thought in response to Governor Kohn's comments: Would the phrase "add to" do a better job than "increase the size of" in conveying the sense that these programs are going to make the balance sheet bigger than it otherwise would be, rather than lead to an absolute increase in the size of the balance sheet? | 66 |
fomc | 2,008 | I am not sure those words help me, actually. "Add to" sounds the same as "increase" to me. I have missed the subtlety here. | 33 |
fomc | 2,008 | Other things held constant. | 5 |
fomc | 2,008 | Ceteris paribus. We could put that in there. | 13 |
fomc | 2,008 | It is already Greek anyway. [Laughter] President Lockhart. | 14 |
fomc | 2,008 | Thank you, Mr. Chairman. My preference is to move in this meeting to the consensus lower-bound range for the funds target, and I prefer the range of 0 to 25. So I believe either alternative A or alternative B will work as serviceable options, and I can live with either one. But I actually lean toward alternative B. I t... | 492 |
fomc | 2,008 | Thank you. President Yellen. | 7 |
fomc | 2,008 | Thank you, Mr. Chairman. I think, at the end of the day, alternatives A and B really amount to the same thing in terms of policy. So I could live with either, but on communication grounds, my own strong preference would be for B. I think it is important at this juncture for the FOMC to state very clearly what it wants ... | 799 |
fomc | 2,008 | Thank you. President Hoenig. | 7 |
fomc | 2,008 | Thank you, Mr. Chairman. If we were still working with the framework of targeting the fed funds rate, I would prefer D, and I would accept C, and I would vote accordingly. But I think what I've heard in the past two days is that we have really abandoned that framework, and this is kind of a ratification of that. I thin... | 334 |
fomc | 2,008 | Again, as I said yesterday, this is a work in progress. | 14 |
fomc | 2,008 | I agree. | 3 |
fomc | 2,008 | We'll keep working on it. I didn't quite get your proposal. Do you propose leaving in the sentence about Treasuries at this meeting? | 28 |
fomc | 2,008 | If we're going to have statements that say we're going to purchase mortgage-backed securities as conditions warrant, I don't think "purchasing longer-term Treasury securities" is a much different step from that, so we can leave it in. | 46 |
fomc | 2,008 | Okay. President Pianalto. | 6 |
fomc | 2,008 | Thank you, Mr. Chairman. Obviously, for us to counteract the powerful forces that are weakening our economy and financial markets, we should provide maximum monetary policy stimulus as quickly as possible, and conducting monetary policy on the basis of a fed funds rate target is no longer the best strategy. I do think ... | 512 |
fomc | 2,008 | Thank you. President Stern. | 6 |
fomc | 2,008 | Thank you, Mr. Chairman. Well, as several people have observed--and I agree--I don't think there's any significant policy difference between A and B. That's certainly where I am. From a communication point of view, I have a mild preference for B. I think it's a little clearer on the margin and would be helpful in that ... | 416 |
fomc | 2,008 | Thank you. Maybe I should ask Bill. Do you see any purely operational issues in the next few months if we decide to purchase longer-term Treasuries? | 32 |
fomc | 2,008 | We can do it, but we're under a strain. As long as we don't start until sometime in January, I think we could manage, as long as you don't ask us to do it every day. | 41 |
fomc | 2,008 | We won't. | 3 |
fomc | 2,008 | Every other day? | 4 |
fomc | 2,008 | How about once every couple of weeks? | 8 |
fomc | 2,008 | President Plosser. | 5 |
fomc | 2,008 | Thank you, Mr. Chairman. These are, indeed, troubling times, and I think in troubling times it's even more important that we be as transparent and clear as possible. I think it's time that we publicly convey that we have entered a new monetary policy regime. To do otherwise perpetuates the view that we are no longer in... | 1,694 |
fomc | 2,008 | Thank you. President Fisher. | 6 |
fomc | 2,008 | Mr. Chairman, before I get started, I do think that President Plosser has raised good issues on the governance matter. I hope that we will continue to discuss this, bearing in mind that there may be changes in the composition of the governors with a new President and given the faith that we built up with the existing g... | 810 |
fomc | 2,008 | Thank you. First Vice President Cumming. | 9 |
fomc | 2,008 | Yes, thank you. Like others, I see the circumstances as requiring the most action we can take. Therefore, I would favor alternative A somewhat over alternative B, but I could live with either. I think that alternative A has the advantage, which President Bullard described and others have referred to, that it does signa... | 305 |
fomc | 2,008 | I'm sorry. What was the beginning? | 8 |
fomc | 2,008 | I think that President Lockhart was proposing that it follow paragraph 2, perhaps in its own paragraph. We would raise the question of the risk of too low inflation but then have the next paragraph really speak to what our goals would be, and I thought the sentence that you had sounded good. | 59 |
fomc | 2,008 | I can confuse the matter by saying that I was thinking of it in alternative B, and Ms. Cumming has it in alternative A. So somewhere in there. | 33 |
fomc | 2,008 | Then continuing with this, I would comment on the next paragraph. I'm very sympathetic to the idea that President Lacker was putting forward--that we somehow need to talk about our expectations about the size of the balance sheet. I was going to offer one suggestion: Perhaps for the "entail the use of" phrase in the fi... | 507 |
fomc | 2,008 | Thank you. Governor Warsh. | 7 |
fomc | 2,008 | Thank you, Mr. Chairman. As others have said, the choice among these alternatives, particularly A, B, and C, is not really a choice about the effective rate. It's a choice about our clarity, our conviction, and maybe most important, our readiness in announcing a new regime. As I described yesterday, I think the zero lo... | 702 |
fomc | 2,008 | Thank you. Governor Kroszner. | 9 |
fomc | 2,008 | Thank you very much. Obviously you have a bleak outlook. It's very important to act quickly and decisively, and I think it's clear from the discussion that our choice is between A and B. But as a number of people have mentioned, the economic substance is probably nearly identical in alternatives A and B. Our exposition... | 995 |
fomc | 2,008 | Thank you. Governor Duke. | 6 |
fomc | 2,008 | Thank you, Mr. Chairman. I do favor alternative A. In terms of what will happen with the prime rate, I frankly don't know, but I think it will leave the banks to determine their own prime rate and floors as they wish. I would not minimize the fact that we are actually still setting a rate for the interest on excess res... | 488 |
fomc | 2,008 | Thank you. Boy, you've left me a simple task. Yes, a two-hander from President Fisher. | 22 |
fomc | 2,008 | Mr. Chairman, I just want to come back to a point I suggested. Is there any sense in transposing paragraphs 3 and 4 to emphasize the new regime? | 35 |
fomc | 2,008 | Well, let me comment. | 6 |
fomc | 2,008 | Yes, sir. | 4 |
fomc | 2,008 | President Lacker. | 4 |
fomc | 2,008 | In light of our discussion of "use of" in this balance sheet quantitative, I was going to point out that President Plosser's suggestion about a specific number for an upper bound on the size of our balance sheet would remedy the problem that we were discussing there. In addition, it would greatly alleviate the deep dis... | 122 |
fomc | 2,008 | Let me just say, generally speaking, that we are making a lot of changes here. I'd like to suggest that we move gradually. But one suggestion I did like and would propose to see if it helps you is First Vice President Cumming's suggestion of saying that we'll provide support with measures that sustain the size of the F... | 107 |
fomc | 2,008 | Because the word "size" is a quantitative word, it does a lot better than "use of," which is ambiguous about sterilization. So to that extent I view First Vice President Cumming's suggestion as very positive. | 45 |
fomc | 2,008 | President Plosser, does that satisfy you for today? | 12 |
fomc | 2,008 | Would you read that again, please? I'm sorry, Mr. Chairman. This is very difficult. | 20 |
fomc | 2,008 | Just for today, "the focus of policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level." | 47 |
fomc | 2,008 | I think it is the focus of the FOMC's monetary policy. | 15 |
fomc | 2,008 | The focus of the Committee's policy. | 8 |
fomc | 2,008 | Of the Committee's policy--fine. | 8 |
fomc | 2,008 | Is that okay? | 4 |
fomc | 2,008 | Yes, much improved. | 5 |
fomc | 2,008 | All right. So in the spirit of trying to move gradually and not just overwhelm the market, I would like, as I say, to move halfway to where we want to be. There was a slight majority in favor of alternative A, but I'm very concerned that, if we don't say anything about the funds rate, there is just going to be confusio... | 258 |
fomc | 2,008 | I'm sorry. Say that again. | 7 |
fomc | 2,008 | "Target range for the federal funds rate of between 0 and 1/4 percent." | 19 |
fomc | 2,008 | "Of between"? | 4 |
fomc | 2,008 | Oh, sorry. Not "of between" but "a target for the federal funds rate between 0 and 1/4 percent." | 28 |
fomc | 2,008 | So the target is between. | 6 |
fomc | 2,008 | A target or a target range? | 7 |
fomc | 2,008 | Target range. | 3 |
fomc | 2,008 | Target range is between. | 5 |
fomc | 2,008 | "The target range for the federal funds rate between 0 and 1/4 percent." | 18 |
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