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fomc | 1,979 | I would have to translate it into the quarterly average. | 11 |
fomc | 1,979 | The quarterly average would hold it to around that, I think. | 13 |
fomc | 1,979 | The Committee's target is for Q4 1978 to Q4 1979. If we had a quarterly average rate of 5.9 percent [for the fourth quarter] the rate [for the targeted period] would be 5.3 percent. To the degree that you lower the [rate desired for the remaining] months to what you were suggesting--and depending on when exactly in the... | 119 |
fomc | 1,979 | Well, that's why you are emphasizing September to December because that would at least bypass a variable. | 19 |
fomc | 1,979 | This shows the slowing that's going to occur. The slowing is in process, but the effect on the quarterly average is delayed because we are going into the quarter with such a high rate. | 37 |
fomc | 1,979 | And we already have 5 percent for the first three quarters. Am I right? | 17 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | So with 5.3 percent, M1 growth would actually be going up in the fourth quarter? | 21 |
fomc | 1,979 | We are coming off a 9-1/2 percent rate in the third quarter. | 18 |
fomc | 1,979 | We are starting the fourth quarter high, so it's very hard to get that down. | 17 |
fomc | 1,979 | It seems to me that we can target better on what we want the growth for the year to be than on September to December. | 26 |
fomc | 1,979 | Well, that's true. | 5 |
fomc | 1,979 | Oh, I don't agree. | 6 |
fomc | 1,979 | Well, I know it has to be translated into [the rate for the September-to-December period] for purposes of the operating technique, but it's hard--unless you know what the pattern is apt to be between September and December-- | 47 |
fomc | 1,979 | That's what we are doing. We would be determining a pattern. | 13 |
fomc | 1,979 | Well, I agree with Bob. | 7 |
fomc | 1,979 | I think the only number we can concentrate on operationally is the one for September through December, given the figures that have been shown here in the memo. We can make a precise arithmetic computation at lunch if we want to, I'm sure. Obviously, the lower that figure is, the more it takes a little off the annual gr... | 68 |
fomc | 1,979 | My point, Mr. Chairman is that the staff started with the numbers on the left-hand side, 4-1/2, 6-1/2, and 7-1/2 percent, or 5.3, 8, and 8 percent. And then they went back and produced a September-to-December figure. It's very difficult for us to produce the figures here that would be compatible with what we might want... | 93 |
fomc | 1,979 | Just interpolate | 2 |
fomc | 1,979 | It seems to me we are better off, Mr. Chairman, to aim for a growth rate for the year and let the staff work it out. | 30 |
fomc | 1,979 | That's essentially what I am saying. | 7 |
fomc | 1,979 | I don't think that's right because a very small change in the growth rate for the year has a very big effect on the growth rate for the September-to-December period. And it's that latter period that we are dealing with here. | 46 |
fomc | 1,979 | Really, we have only 2 months that we can influence. | 13 |
fomc | 1,979 | You just have to interpolate. If you went all the way down to 1.3 percent [for September to December] you would be at 4.5 percent [for the year]. So if you want to aim half way between [the two figures shown], the annual growth is going to be exactly half way between 4 . 5 and 5.3 percent. | 77 |
fomc | 1,979 | But [the choice] has tremendous interest rate implications. | 11 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | Mr. Chairman, I would support 4.6 percent. | 13 |
fomc | 1,979 | I would propose 4 percent for M1 and 7 percent for M2 in order to give us a little margin for error. | 27 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | That's fine with me | 4 |
fomc | 1,979 | We have some margin [with the 4.6 percent] | 13 |
fomc | 1,979 | We haven't got much margin. | 6 |
fomc | 1,979 | It's 0.7 on the yearly average. | 10 |
fomc | 1,979 | We need to do two things, in my judgment. One is to set a money supply target that causes the funds rate to rise but not excessively. The other is to set a range that won't allow the funds rate to fall excessively. And to me it looks as if something like 4 percent on the money supply would probably do that. | 68 |
fomc | 1,979 | Let me note that we have other instruments for biasing at the start, including the discount rate that the Board is going to have to decide upon here. If we raise the discount rate substantially, we are going to get an upward movement in the funds rate in the short run. | 56 |
fomc | 1,979 | And the impact of the reserve requirement change can do the same thing. | 14 |
fomc | 1,979 | I'm going to vote for the 4.6 percent | 11 |
fomc | 1,979 | Given a moment of hesitancy here let me make a suggestion, at least tentatively. Nothing is solid. I just want to move on. Let's assume 4.6 percent for the moment, or 4 . 5 if you want a round number. There i s obviously a good deal of concern that that is too high and a good deal of concern about what will happen in t... | 181 |
fomc | 1,979 | Well, what are you going to do with the discount rate, take it to 12 percent? | 20 |
fomc | 1,979 | Well, I think that's obvious | 6 |
fomc | 1,979 | If we take it to 12 percent and we want the federal funds rate around the discount rate, that means the funds rate should be approximately 12 percent. | 32 |
fomc | 1,979 | I didn't want to get into that question. I would assume that if we take the discount rate to 12 percent--unless we have a reverse bias in terms of the borrowings--that the federal funds rate is going to go up in the neighborhood of 1 percentage point under normal relationships. | 59 |
fomc | 1,979 | That's 13 percent | 4 |
fomc | 1,979 | Now, whether any relationship is normal in this period, who knows? But I think that's the best guess one could make and that would introduce the bias in the short run. | 35 |
fomc | 1,979 | But to talk about a funds rate range, it seems to me we have to have in mind where we are going to put the discount rate. | 29 |
fomc | 1,979 | I agree. These things are very hard to [separate]. | 13 |
fomc | 1,979 | Mr. Chairman, do we have to move on the discount rate immediately? | 15 |
fomc | 1,979 | Well, we have to discuss that. Obviously, all these things have to be decided. But for myself, when I look at this potential package, I think there is enough risk of confusion in the announcement that an increase in the discount rate of 1 percentage point would be highly salutary in terms of our immediate objective. In... | 111 |
fomc | 1,979 | The increase has to be at least one percentage point. | 11 |
fomc | 1,979 | Well, maybe it's easier if we [discuss] all the [aspects]. Let me tell you what the Board has been discussing on reserve requirements. What I would presume the Board members will agree upon is a packaging together of all managed liabilities, with all its difficulties. That would include CDs, federal funds for non-membe... | 252 |
fomc | 1,979 | Was his suggestion $1 billion? | 7 |
fomc | 1,979 | I said $1.5 billion; it's $1.2 billion now | 15 |
fomc | 1,979 | Let's say $1.2 billion to $1.5 billion. I would feel quite differently, frankly, about that borrowing level without a discount rate change. I think we would probably lose too much without the discount rate change. Without the discount rate change I'd put in a much bigger bias on the borrowing side initially, in effect,... | 152 |
fomc | 1,979 | You are staying with the suggestion of an 11-1/2 to 14-1/2 percent funds rate range, right? | 28 |
fomc | 1,979 | Yes, for purposes of discussion. | 7 |
fomc | 1,979 | If we have a discount rate change to 12 percent, why would we want an 11-1/2 percent lower constraint on the federal funds rate? | 32 |
fomc | 1,979 | Well, in those circumstances, I think the probability of going to 11-1/2 percent is negligible. | 23 |
fomc | 1,979 | Sure. | 2 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | But I think we want a fairly wide range. | 10 |
fomc | 1,979 | HOW symmetrical do we want to make it at this point? I grant that 12 is close to 11, closer to 11-1/2-- | 32 |
fomc | 1,979 | Phil probably figured it out. The 11-1/2 to 14-1/2 would probably make the range symmetrical around the best guess of where the actual funds rate might go in the short run. | 43 |
fomc | 1,979 | It's a 13 percent midpoint. | 7 |
fomc | 1,979 | Let me say again that if we adopt this technique, I don't think we can be at all sure where the fed funds rate will go in the very short run. | 33 |
fomc | 1,979 | It doesn't matter all that much. | 7 |
fomc | 1,979 | And it doesn't matter all that much. | 8 |
fomc | 1,979 | It would disavow us. | 7 |
fomc | 1,979 | No. | 2 |
fomc | 1,979 | It matters to you, Henry, if it goes down | 11 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | It doesn't matter to me if it goes down. | 10 |
fomc | 1,979 | It doesn't matter very much within a range that is set like this one here. | 16 |
fomc | 1,979 | Well, that's an important point--not so much for a decision today, but looking toward the future. | 21 |
fomc | 1,979 | Well, looking to the future, I may want to let [the funds rate] be more responsive, because in my mind that's one of the advantages of this system. The technique fits the times; our situation is more volatile. So, that's one of the reasons I like this. I would vote yes, for the time being, on the package that you prese... | 74 |
fomc | 1,979 | The rates that really would matter would be the other short-term rates; the funds rate matters much less. The other short-term rates, I think, would move up in relation to the discount rate and the money supply constraint. If the funds rate stays at the lower end of the band for a long time, then that would pull the ot... | 71 |
fomc | 1,979 | My only concern is whether that [range] is too constraining on the funds rate. | 18 |
fomc | 1,979 | I agree. | 3 |
fomc | 1,979 | I agree, too. | 5 |
fomc | 1,979 | I can see a real possibility that it will hit 14-1/2 percent and if we seem to lock on it, it will then establish that as the rate. | 35 |
fomc | 1,979 | If we are in that situation, the Chairman can have a telephone conference and we can discuss whether we want to stay locked in or not. | 28 |
fomc | 1,979 | The staff paper did recommend a range of 3 to 5 points didn't it, Steve? | 19 |
fomc | 1,979 | Yes. I don't know about Peter--he can speak for himself--but I feel very strongly that if we are in any way going to be held responsible for this operating technique working out, a very wide federal funds rate range is necessary. | 48 |
fomc | 1,979 | Well, we have a real conflict here in terms of the way we want to place our risks. I must say that pretty consistently in my own thinking I come down on the side of not wanting to let this federal funds rate go out of sight by accident in the initial stages. Now, that's a matter of judgment. And the general tenor of th... | 161 |
fomc | 1,979 | May I suggest a 4 percentage point spread of 11-1/2 to 15-112 percent with consultation if it goes over 14-1/2? | 35 |
fomc | 1,979 | I'd support that. That's good. | 7 |
fomc | 1,979 | I ' d rather see it wider. | 8 |
fomc | 1,979 | I think we ought to have some sensitivity to a 16 percent federal funds rate. | 17 |
fomc | 1,979 | Understand that even with this kind of constraint, on an individual day it might well be [outside the range]. SEVERAL. Oh, sure | 29 |
fomc | 1,979 | We are talking about a weekly average. | 8 |
fomc | 1,979 | Let me ask a question. Are we very closely in the ball park here? SEVERAL. Yes. | 22 |
fomc | 1,979 | Why not stop for lunch? | 6 |
fomc | 1,979 | I second that! | 4 |
fomc | 1,979 | I don't mean wander away for lunch. Let's take 10 minutes and come back to the table. | 20 |
fomc | 1,979 | Where is lunch? | 4 |
fomc | 1,979 | Next door. [Lunch recess] | 7 |
fomc | 1,979 | Let's try to reach some consensus on what the proposal should be like if we do it [under the old method]. And if we have a consensus on both of those, we could just vote up or down on which approach we like better, with as many people feeling comfortable about [our decision] as humanly possible. I think you can assume ... | 83 |
fomc | 1,979 | 12 percent? | 3 |
fomc | 1,979 | A 1 percentage point increase. Under those circumstances, let me modify my proposal slightly. We work with a 4 . 6 or 4.5 percent target for M1, recognizing that people would rather see M1 growth come in somewhat lower, certainly, than higher. But that to us is a satisfactory target. In an uncertain world, all other th... | 453 |
fomc | 1,979 | Excuse me, Paul, are you talking about 11-1/2 to 15-1/2 percent? | 25 |
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