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fomc
1,979
Thank you, Nancy. Paul.
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I think you were very eloquent, Mr. Chairman, and I agree with a good deal of what you had to say, but overlooked was the fact that inflation has tended to get worse and that the economy is very much at capacity and ought to slow down. So I find myself very much with Mr. Coldwell in terms of the specifications.
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Thank you. Henry.
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I share your views, Mr. Chairman, about what monetary policy can do with respect to the real sector; I don't think we can do anything that will affect it very much very soon. But monetary policy certainly can affect expectations and prices; prices can be changed overnight because of inflation expectations and I think t...
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A money market directive. Ernie.
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Mr. Chairman, my preference is for the specifications of alternative C except for the funds rate range. I would [lower] that down some to, say, 10 to 10-3/4 percent, with the idea that we would move during the first week to above 10 percent and by the end of the week probably to 10-1/4 percent depending somewhat on mar...
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And which way [on the directive]?
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With an aggregates directive.
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Alternative C and an aggregates directive. Thank you. Roger.
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Thank you, Mr. Chairman. I would opt for alternative B straight down the line including the funds rate range. On the funds rate I'd remain where we are unless we see the aggregates moving outside the lower end of the ranges.
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Did you say an aggregates directive?
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A money market directive.
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Thank you, Roger. Larry.
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Mr. Chairman, I would opt for alternative A, for easing. If that were done, I would urge the Chairman to explain the rationale that this is not a permanent softening of our anti-inflation emphasis--that we are really doing it temporarily to try to reduce the impact of a recession. Sometimes our tendency is not to state...
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Well, thank you, I think. Mark.
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I'm afraid it comes too late, M r . Chairman, since I'm no longer a voting member. But I like both your recitation and your specifications and I would go with those.
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I knew I'd get you someday! Willis.
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I have no quarrel with alternative B. I just wonder, in view of the discussion, if there's some symbolism that could be effected without really much change in market conditions, such as a 114 point increase in the discount rate. Reserve requirements might be expanded on some other items such as on Eurodollars and other...
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Those are certainly things we have to consider.
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I meant to mention those, too. I think that is correct.
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Thank you, Willis. Jim.
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Mr. Chairman, we certainly agree with your comments with respect to adopting a policy that seems to be appropriate given the lags in our forecasts. We'd opt for either "A" as proposed or for the modification suggested by John Balles.
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Thank you, Jim. Dick.
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I don't know whether it's a fact of whom I'm sitting between today but I find myself in amazing agreement with them on certain points. We would prefer alternative B. We would not quibble about a 118 point increase in the federal funds rate although we don't think it's required. As far as [raising] the discount rate, th...
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Okay, thank you all. Let's see what we have. Bob did you have a range for the fed funds rate?
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I neglected to say it, M r . Chairman. I had 9-314 to 10-1/4 percent, but I could leave it unchanged without much quarrel, really.
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What is it now?
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It's 9-314 to 10-112 percent, but I wouldn't want to use the top quarter.
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I had the same specs as you did, Mr. Chairman.
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We have a very mixed bag. Paul, did you want a money market or an aggregates directive?
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[Given] the fact that we've been operating with a money market [directive], I presume we would continue to do so almost regardless of what we say here today.
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We keep saying we're doing something else, but we keep going with a money market directive, don't we?
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I think that would be appropriate, yes.
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Well, it's going to be hard to make anything out of this. Five have the bottom of the fed funds range at 9-3/4 percent--1 told you it would be five to five--and one has it at 9-1/2 percent. John, you said 9-1/2 percent on the bottom side?
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Yes sir.
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Could we get you up to 9-3/4 percent? Then we'll have six.
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Well, I'm a reasonable guy.
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On the top side we have three at 10-1/4 percent and everybody else is at 10-1/2 save Henry, who is at 10-3/4 percent. Have I misstated anyone's views? I think Henry is the only one at 10-3/4. As modified, John, you're 9-3/4 to 10-1/4; Bob [Black] had the same, 9-3/4 to 10-1/4. Phil and Bones had 10 to 10-1/2. Bob Mayo ...
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Henry's safe!
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We have one member for easing some and we have five for prevailing [conditions]. Now, if John Balles is a reasonable man, he'll stick with prevailing and we'd have six for that.
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I'm sorry, Mr. Chairman, will you say that again?
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We have a range for the fed funds rate and now the question is, do we keep the present [rate] or move it up or down. You suggested we move down. Five other members of the Committee suggested the prevailing rate. And four others suggested going up, although Bones did not; he said 10-1/8 percent and that's where we are n...
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Right.
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Where we are is 10 to 10-1/8 percent, so you are pretty much for the prevailing--
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I'm for prevailing also.
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Well, we have [a majority for] the prevailing rate, obviously. Now for the ranges. For M1, there's a definite split. Let's put down 3 to 8 percent. We have two for 3 to I , one for 4 to 8, one for 5 to 9, and a couple for 2 to 7 percent. Help me with my mathematics. It looks as if we need something lower to catch some ...
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HOW about 3 to 9 percent?
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Well, we need two 3 to 8 percent ranges--3 to 8 on M1 and on M2. That's the answer! Actually, we need 3 to 8-1/2 percent on M2. don't we? Or 4 to 8-1/2 percent. You all wouldn't stick with anything reasonable. You had to have all this individuality.
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We were reasonable; we just weren't persuasive.
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Eight are calling for that directly and one is near it. Put down 4 to 8-1/2 percent. There seemed to be a majority for a money market directive, which means it's all an exercise anyway.
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Is it 4 to 8-1/2 percent for both M1 and M2?
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Let me see if I can read what I have here. This is very hard. Let's say a fed funds range of 9-3/4 to 10-1/2 percent and maintain the prevailing rate, which now is 10 to 10-1/8 percent--is that correct, Peter?
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Yes.
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Would you repeat that midpoint?
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The midpoint would be 10 to 10-1/8 percent, the prevailing level. The midpoint is slightly off center--asymmetric if you want to be technical. The rest is: M1, 3 to 8 percent; M2, 4 to 8-1/2 percent; and a money market directive. How many of the voting members do we have for that?
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An indication?
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An indication only MR. ALTMA". None.
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None. Zero. I knew we weren't going to get a vote today! I told you we were going to keep [the existing directive]. Let's go [through] this. How many are happy with the 9-3/4 to 10-1/2 percent [funds range] with the prevailing [funds rate initially]? We seemed to have 6 or 7 for that before. I don't know what happened....
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What about the aggregates?
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Obviously, it's the aggregates that are wrong. All right, nobody wanted any of the aggregates [ranges I cited]. Let's go back down the list. John, what do you want for M1 on a compromise? You didn't get your 5 to 9 percent the first time around. You were [not] the only one who went as high as 9, because Bob [Black] out...
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Mr. Chairman, I think I said the 5 to 9 percent.
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Oh, we got them mixed up here.
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I don't want him to get the credit!
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What I have down here is that John had 5 to 9 percent. What did you really say before?
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I said 3-1/2 to 7-1/2 percent.
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I'm sorry, I'm talking M2
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It was the specs of alternative A on M1 and M2.
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You had 3-1/2 to 7-1/2 percent, right?
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Yes.
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And you don't buy 3 to 8 percent. Or do you? It's a half percentage point each way--very precise tuning.
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Mr. Chairman, I would take the revised specs that you indicated of 3 to 8 percent on M1 and 4 to 8-1/2 percent on M2. I do it with great reluctance in view of the money market directive, however. That's my hang-up.
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Okay. Let's go down [the list] again. Bob, you had much higher ranges: you had 5 to 9 and 6 to 10 percent.
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I could come down to 4 to 8 percent on M1. M2 doesn't make a lot of difference to me really.
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Could you live with 4 to 8-1/2?
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Oh yes, I'd like that even better.
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That's the M2 [you proposed].
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Yes.
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I can live with that part of it, but I--
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You need 4 to 8 percent on M1.
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If we have a money market directive, I would want it that high. If we have an aggregates directive, I could go with 3 to 8 percent, I guess.
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All right. Phil Coldwell, you had 2 to 7 and 3 to 8 .
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Well, what I think is important to look at here is the upper part of the M1 range. Seven percent is the peak for alternative B, and if we're going to maintain a steady directive I think we ought to keep some balance. I lowered [the bottom of the M1 range] to 2 percent just to give a little balance, hut I'm willing to g...
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Okay. Bones, you had 2 to 6 and 4 to 8 .
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I like the 3 to 7 percent much better and, obviously, 4 to 8-1/2 percent is fine, particularly if we're going to have a money market directive.
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Okay. Bob Mayo, you had 3 to 7 and 4-1/2 to 8-1/2.
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I'm flexible within a 1/2 point on those.
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Okay. Then you really can be bracketed. And you had an aggregates directive.
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I had aggregates. But Paul is right: In effect, we're using a money market directive.
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That's what we've been doing, yes. Chuck, you had 4 to 8. You don't like 3 to 8? m . PARTEE. Well, I really do believe we ought to have something that brackets the path for getting back within the longer-run ranges.
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And 3 to 8 percent didn't do that? m . PARTEE. No. The 4 to 8 is close--6-1/2 percent is the midpoint that is specified on that chart over the six months--so even that's a little short. It really ought to be what Bob suggested, 5 to 9 percent. But, I, of course--
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Nancy, you had--
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I had 3 to 7 and 4-1/2 to 8-1/2.
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Yes, 3 to 7 and 4-1/2 to 8-1/2. Paul, YOU had the 2 to 7 and 3 to 8 that Phil had specified.
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I don't feel very sensitive to these ranges when the figure bounces around plus or minus 5 percentage points. I can't worry about a half percentage point on either end.
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Henry, you had 2-1/2 to 6-1/2 and 4 to 8 as the ranges.
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I have a hard time because I add 2-1/2 percentage points to each of these and it gets very high for M1. M2 wouldn't worry me so much.
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All right, let's try it again. Where did we come out? Murray, you're supposed to do the rest! I think we can sell 4 to 8-1/2 percent on M2.
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How about 3 to 7-1/2 percent on Ml?
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With 3 to 7-1/2. you didn't pick up Mr. Partee, did you?
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No, you certainly didn't. Of course, you're not looking with us on the money market-- [Laughter]
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