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fomc | 1,978 | I would just raise the question with respect to January, in view of the uncertainties that are prevalent. I'm wondering what the public relations aspect of it is, even though we hold it by telephone, to say that there is not a meeting in January. | 50 |
fomc | 1,978 | Wild enthusiasm, I would think. | 7 |
fomc | 1,978 | I think we are missing the market aspect of this. | 11 |
fomc | 1,978 | Well, I do think we can discuss it really quite well. | 13 |
fomc | 1,978 | I don't think anybody will know the difference unless we-- | 11 |
fomc | 1,978 | Well, not having the January meeting, we won't release the policy record for today's meeting until a little later. Other than that, I can't see-- | 30 |
fomc | 1,978 | Well, why would that necessarily follow, Chuck? Would that necessarily-- | 14 |
fomc | 1,978 | Yes, I think so. | 6 |
fomc | 1,978 | The release is three days after the next meeting. | 10 |
fomc | 1,978 | The reason we release it when we do is because until then there is an operational instruction. | 18 |
fomc | 1,978 | But wouldn't you consider a telephone meeting in January a meeting? | 12 |
fomc | 1,978 | I would rather not. | 5 |
fomc | 1,978 | Well, that's the problem. I think it should be considered a meeting. If we are going to have it, I'd consider that we are going to spend several hours. | 34 |
fomc | 1,978 | You know, we do have telephone meetings that--perhaps I should defer to the Secretary. | 18 |
fomc | 1,978 | But they are different. This would be a mandatory meeting on a [specified] date. | 18 |
fomc | 1,978 | It's not mandatory. I think the Chairman said that he had every intention at this moment of calling you up on the 16th. | 27 |
fomc | 1,978 | That's right, to consult on that date. So we wouldn't have an official meeting or we wouldn't have problems with new policy directives and the release of the other-- | 32 |
fomc | 1,978 | Any actions taken at that time would be reported in the policy record [for today's meeting]. | 18 |
fomc | 1,978 | Just as we do when we have a meeting by telephone late [in the intermeeting period], it's reported maybe a week or ten days later. | 29 |
fomc | 1,978 | I think Willis has a good point. I hope we don't advertise that we are skipping-- | 18 |
fomc | 1,978 | If anybody asks about it, don't you tell the truth? It's that we are having it a couple of weeks [later] because we have to prepare for the new presentation to Congress and we have to wait until we get the budget to do it. | 50 |
fomc | 1,978 | I think we ought to go ahead and say that because they are going to be waiting for the policy record three days later. | 25 |
fomc | 1,978 | I'd inform everybody. My first reaction is that I don't think there will be any feeling of letdown because it's very logical. If we have to report on the 20th of February, we don't have the data until quite late in January. It's hard for us to do otherwise. | 57 |
fomc | 1,978 | Mr. Chairman, our practice has been to respond to questions about the date of the [next] regularly scheduled meeting. We have always given out that date. We don't give out this proposed schedule, for example; it's not regarded as a fixed schedule. | 51 |
fomc | 1,978 | We do give out the schedule; we have for the last couple of years. | 16 |
fomc | 1,978 | Well, Joe, all you have to do in giving out the schedule is to add a paragraph to your release saying that this has been scheduled at this time to permit preparation for the new reporting required under Humphrey-Hawkins. Okay, where do we stand on meetings? There seemed to be acceptance of the proposal, with I guess a ... | 82 |
fomc | 1,978 | I don't know; the careful hope came from both directions. | 12 |
fomc | 1,978 | I am prepared to move in either direction; it's that particular time that causes me a problem. | 19 |
fomc | 1,978 | The Board does have to deal with the question of how we organize to be responsive to the mandate of Congress. It is a question we all have raised. First of all, there is nothing in that bill that calls upon the Committee to adopt explicit economic objectives for the calendar year [or] for the two calendar years and we ... | 323 |
fomc | 1,978 | Well, that is my dissent, as I am sure you all have [seen]. I feel very strongly that the object of policy should be toward [achieving] what I consider to be the ultimate goals for policy, mainly output, employment, and prices--and one that we have no control over, which is an acceptable distribution of income. I feel ... | 464 |
fomc | 1,978 | I'm not sure I understand this issue. Under the Humphrey-Hawkins we are to make our report with respect to the ranges of growth or diminution of monetary and credit aggregates, taking account of past and prospective developments in employment and unemployment, etc. So, won't we have to look at the prospective [developm... | 69 |
fomc | 1,978 | But the President will have specific short-run objectives for the economy. | 13 |
fomc | 1,978 | But we'd say here's our monetary policy and it is based on the fact that we expect unemployment to be slightly different or substantially different [than the President's objective]. Won't we have to say that? | 40 |
fomc | 1,978 | If we think it will be. | 7 |
fomc | 1,978 | So are you arguing about what you know in advance [as to] whether we are? Because if it happens to be consistent, Nancy, we have covered your point, haven't we? | 37 |
fomc | 1,978 | Not the point. The President will present a rather full-blown economic forecast and you can read this Act in such a way that the Federal Reserve is to look at that forecast and say what kind of growth in the money and credit aggregates will be necessary to achieve it. And it may be that the-- | 61 |
fomc | 1,978 | No, I don't read it that way. Do I misread it? | 15 |
fomc | 1,978 | It's really point 3, I think, Mr. Chairman. The relationship of the aforesaid-- | 21 |
fomc | 1,978 | Yes, first we say what our plans are--the objectives and plans of the Board of Governors and the FOMC. | 25 |
fomc | 1,978 | And that has to do with the monetary aggregates. | 10 |
fomc | 1,978 | [It says] the "relationship." It doesn't say that we tell what it takes to get the President's [objectives]. We say what we are going to do, and then we give the relationship to the President's [goals]. Either it's going to be consistent or inconsistent. | 58 |
fomc | 1,978 | I don't think it necessarily implies forecasting a Committee forecast. | 11 |
fomc | 1,978 | [It says] taking into account the prospective relationship of our objectives and plans. Take into account [prospectively]. | 24 |
fomc | 1,978 | We can take account of the future, but we don't have to say this policy will produce X GNP. | 22 |
fomc | 1,978 | No, but you can't hardly say that you have taken into account prospective employment unless you have taken it into account. | 23 |
fomc | 1,978 | I think we have a real danger here. We may very well be in a situation where we will state our monetary policy and it's only going to take the outsiders about two seconds to figure out that because of our monetary policy the President can't achieve his objectives. | 51 |
fomc | 1,978 | If that's the case, we ought to be saying so under three. | 14 |
fomc | 1,978 | I think that's right, if it is obviously that [inconsistent]. I don't think that it is. Many times before, the outsiders have said that the monetary policy was not consistent with general objectives, and in fact it turned out to be consistent. So who knows? | 54 |
fomc | 1,978 | But our reports to the Congress this year have rather consistently been at variance with the Administration on growth of the economy, for example. We said here are our ranges and we expect the economy to grow at this rate and it was always less than the Administration's. I don't think that will [lead to] any particular... | 65 |
fomc | 1,978 | It may lead to more of a crisis in this period [unintelligible] because then the [Congressional] committee will make its recommendations for different policies to the Congress, so Congress could instruct us to do this. | 45 |
fomc | 1,978 | But most of the time it will be in the range of uncertainty anyway. Nobody can say with full conviction whether it's consistent or inconsistent. | 27 |
fomc | 1,978 | I'm just trying to reconcile this difference of opinion. It seems to me, having decided what our objectives and plans were, if we then came to the point of what is their relationship to those in the President's economic report and found a variance, I think we would have to report that. | 58 |
fomc | 1,978 | Which means then you would have to give your forecast. Yes. | 13 |
fomc | 1,978 | No, if you're at variance. If you're not at variance, you're really saying you are consistent with that forecast. | 23 |
fomc | 1,978 | Yes. | 2 |
fomc | 1,978 | Have we actually, in our own practices, ever discussed or agreed upon what our ultimate economic objectives would be and then attempted to make our monetary policy decisions consistent with the achievement of those objectives? Or have we really sort of played around with our monetary policy and then asked our people to... | 74 |
fomc | 1,978 | I don't [know], Larry. We may have gone procedurally one way or the other. But it has been my experience that we have been adopting monetary policy for the conscious purpose of achieving a slower growth rate in the economy than was in the Administration's forecast. And we have been reporting this publicly all year. | 64 |
fomc | 1,978 | But we haven't been prepared to say that the Committee's economic-- | 13 |
fomc | 1,978 | Oh yes, I understand. What we have said is that I have listened to everybody and I've said what I think. That's correct. | 27 |
fomc | 1,978 | You remember we passed that through. | 7 |
fomc | 1,978 | That's what we contemplate continuing. | 6 |
fomc | 1,978 | Okay, I see. Now I'm getting the point. | 11 |
fomc | 1,978 | And then furthermore not directing the staff to develop an economic plan that would be consistent with the President's but to develop reasonable alternative economic and monetary plans and then talk about what the relationship [to the President's economic goals] might be. | 47 |
fomc | 1,978 | Well, this language "the apparent consistency or inconsistency of alternative monetary growth rates with the President's economic goals"--isn't quite clear to me, Chuck, just semantically. In the discussion I think we made clear that what we did not want the staff doing is coming in and saying that X is consistent and ... | 79 |
fomc | 1,978 | Dave. | 2 |
fomc | 1,978 | My point has been covered. | 6 |
fomc | 1,978 | Are we covered? Anybody else? | 7 |
fomc | 1,978 | Well, is Jim going to describe how he proposes to do this? | 14 |
fomc | 1,978 | Yes. | 2 |
fomc | 1,978 | I think our intent is to use the econometric model more intensively to sort out the impacts of alternative monetary policies. So there would be more extensive and in-depth analyses of the alternatives on the real side and price side of the economy, given rates of growth of the aggregates that would be in the Bluebook. ... | 240 |
fomc | 1,978 | Jim, say for instance that we had a range of 4 to 6-1/2. Would you then indicate how 4 and 6-1/2 would be implemented [relative to] the President's program? | 47 |
fomc | 1,978 | That's what we have now. | 6 |
fomc | 1,978 | So if you found that the President's program fell within that range, that would be the conclusion to be drawn. | 23 |
fomc | 1,978 | That it's reasonably consistent. | 5 |
fomc | 1,978 | If we found that it fell outside, we'd tell the truth. But are we sufficiently sure to be able to assert that the President's program is unachievable by our policies? I doubt very much-- | 41 |
fomc | 1,978 | I think any nominal GNP is achievable. I think it's the price/real [GNP] relationship that comes to [unintelligible]. If he said he wanted a 20 percent increase in nominal GNP, I'm sure you could achieve it with monetary policy. Then he might say it would be 8 percent real and 12 percent prices. We might think it would... | 88 |
fomc | 1,978 | Then there are real possibilities. Suppose he proposes a 20 percent nominal increase. Wouldn't we then say we don't want to pursue that objective? | 29 |
fomc | 1,978 | It seems to me that the other thing generally that you can do on this is to state that you are not going to hit it 100 percent. Jim this morning was using some probabilities as to what the chances of a recession are, for example. And it seems to me that we would want to use that route in order to convey the degree of u... | 83 |
fomc | 1,978 | Well, I think very much we should convey the degree of uncertainty because our model results are just one point in a wide spectrum. | 26 |
fomc | 1,978 | It depends on how wide a spectrum. | 8 |
fomc | 1,978 | I might note that in this exercise that I reported today on probability distributions we would hope to do some more experimenting. But in the future, obviously, we can talk a little bit about confidence intervals associated with the model forecast. We do have the standard errors. And we can indicate the uncertainty of ... | 63 |
fomc | 1,978 | Mark. | 2 |
fomc | 1,978 | I'd just like to point out--I think it supports the subcommittee's recommendation--that we do not currently have any place that I know of in the country, let alone in the Federal Reserve System, an econometric model that can be used with any great confidence through the kind of simulation that we are talking about. So ... | 299 |
fomc | 1,978 | We are going to face some serious problems on our first go-around because the Administration's plan will face the dilemma of whether it's opportune to forecast more inflation and therefore to have a lower budget deficit. It is an interesting dilemma because the more inflation they forecast, the more they meet their tar... | 81 |
fomc | 1,978 | However, there is a lag. The entire inflation catches up about 18 months later on the expenditure side. | 22 |
fomc | 1,978 | Well, is it okay if this first time we go about it the way that is described here? | 20 |
fomc | 1,978 | Well, we will have to see. | 8 |
fomc | 1,978 | Yes, I think this will have to be a probing thing. | 13 |
fomc | 1,978 | We may have to spend all day on the 6th. | 13 |
fomc | 1,978 | Well, number 5, I think is pretty easy. | 12 |
fomc | 1,978 | You said that about the [meeting] dates! | 10 |
fomc | 1,978 | We went out of [order]; I lost my page. Oh, there it is. We just have [proposed] some minor word changes in the directive to conform to the expressions used in the Humphrey-Hawkins Act. It might be possible also, in the future, to discard the first several paragraphs of the directive. The [rest of the] committee impres... | 106 |
fomc | 1,978 | This is on the ranges only, not the directive in the-- | 13 |
fomc | 1,978 | Yes, really the main thing is the phrase used in expressing our long-term monetary objectives, which follows the Humphrey-Hawkins language. A couple of other word changes [are suggested] because of other factors; we are talking about annual rather than moving 12-month targets. So I don't think there should be any discu... | 66 |
fomc | 1,978 | Anybody have any problem on 6? Larry, do you have something? [Unintelligible] can't believe it. | 25 |
fomc | 1,978 | I always have been, Mr. Chairman. Some of them don't fly well. But 6 is where I have really very serious concerns and I'd like to express them. In 6 the recommendation the subcommittee made, in effect, provides that the long-term aggregates decisions and the short-term decisions on targeting the fed funds rate really n... | 336 |
fomc | 1,978 | I think it is fundamental. I think the last sentence of recommendation 6 is the one to read. We wanted to assist you in saying what the Committee decisions ought to be from meeting to meeting by tracking what has been happening in a very explicit way and by having the staff provide alternative feasible routes for getti... | 126 |
fomc | 1,978 | Chuck, I would agree totally with the wording of your last sentence; however, it's the early part with which I strongly disagree. And if it's in order, Mr. Chairman, I'd just like to either circulate or read a very brief substitute in wording that I would recommend for the early part of Chuck's number 6. It would read,... | 78 |
fomc | 1,978 | No, please read it. | 6 |
fomc | 1,978 | "The spirit of the new law clearly requires changes in the present procedure for formulating short-term tolerance ranges. The change in the formulation of the long-term ranges will tend to focus greater attention on actual performance relative to these ranges when setting short-term policy objectives. Therefore, we end... | 107 |
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