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fomc | 1,979 | I just wanted to point out that this last paragraph I think has a little range implied for Ml--and for the other aggregates--and the range is centered around 4-1/2. | 39 |
fomc | 1,979 | Why? Oh, because of the "around" 4-1/2? | 17 |
fomc | 1,979 | Well, if we are going to center a range, then I certainly would rather center it around 4 rather than 4-112 percent. | 29 |
fomc | 1,979 | But this is the exact statement of what Paul suggested. It seems to me that at the press conference what he'd be saying is that we are determined to hold these aggregates within the targets previously announced. My point simply is that if we happen to come out at 5 percent for September-December we wouldn't be outside ... | 105 |
fomc | 1,979 | There isn't any safety on M2, Chuck. | 10 |
fomc | 1,979 | Again, it seems to me that you can trade that M2 off against M3. | 18 |
fomc | 1,979 | It may well come in less than that anyway with disintermediation. | 15 |
fomc | 1,979 | I think we are dancing on a pin a little bit here. | 13 |
fomc | 1,979 | Yes, I accept Chuck's point. I think it's well taken. | 14 |
fomc | 1,979 | Yes. We're going to have an awfully hard time-- | 12 |
fomc | 1,979 | We are going to be awfully delighted if we come in any place within these ranges. | 18 |
fomc | 1,979 | Mr. Chairman, is this communication, this [directive], going to be kept within this group as far as publicity--? | 25 |
fomc | 1,979 | Except for the press conference | 5 |
fomc | 1,979 | There are aspects that I think could cause some trouble with the analysis. I'm talking about the wire and the [decision]. | 24 |
fomc | 1,979 | By all means, that is kept strictly confidential. M E . KIMBREL. Mr. Chairman, we seem to be getting close together and I sure would hate to have my friend Mr. Roos cast my vote [as my alternate] but I have to leave and I just want to vote. | 62 |
fomc | 1,979 | I think we are ready to vote. We are voting specifically on this directive. Those blanks are to be filled in with 11-1/2 to 15-1/2 and I think we write in the sentence there about consultation when the funds rate is "in the upper part of the range" or something vague like "toward the top. *' | 74 |
fomc | 1,979 | Toward the top. | 5 |
fomc | 1,979 | Toward the top. And I think what we mean by that is something like 14-1/2 percent. We are talking about 4-1/2 percent "permitted," if you will. Obvious we'd rather have less, if things develop so that we can do it without putting untoward pressure on market rates. And what we are saying clearly is that if this money de... | 110 |
fomc | 1,979 | For security reasons you'd prefer not to get the other Reserve Banks in on the discount rate? | 18 |
fomc | 1,979 | Well, let's just get this vote over with. I believe you understand this slight bias in the way we play that. We are thinking of a federal funds rate ideally in the 13 percent plus range, initially. That would be a highly satisfactory response, but we don't have any close control over it--it could be more or less--and t... | 86 |
fomc | 1,979 | All right. Chairman Volcker Yes President Balles Yes President Black Yes Governor Coldwell Yes President Kimbrel Yes President Mayo Yes Governor Partee Yes Governor Rice Yes Governor Schultz Yes Governor Teeters Yes First Vice President Timlen Yes Governor Wallich Yes | 50 |
fomc | 1,979 | Well, I very much appreciate this discussion. I think it was important. We do have a press release prepared by Joe Coyne. I would like to insert in the press release--and I just want to ask your advice on it--that the Committee voted unanimously on this. | 56 |
fomc | 1,979 | I think you should. | 5 |
fomc | 1,979 | The meeting will come to order. We need approval of the minutes for [the previous] two meetings. If anyone would like to so move-- | 29 |
fomc | 1,979 | So moved. | 3 |
fomc | 1,979 | Without objection, we shall approve the minutes of the two meetings. M r . Pardee. | 19 |
fomc | 1,979 | [Statement--see Appendix.] | 6 |
fomc | 1,979 | Scott, you said that the only thing the foreigners thought we had going for us was our monetary policy. Do you mean in the short run? Do they not see the improvement in the balance of payments that has been projected by the staff? | 48 |
fomc | 1,979 | They see the projections. They've seen the projections over the last few years--the forecast of an improvement on our trade and current accounts and improvement in our inflation picture. And they're still waiting to see when it will come. | 44 |
fomc | 1,979 | They don't believe it, in short. | 8 |
fomc | 1,979 | They believe it will come sooner or later, but they're not going to bet on it. | 18 |
fomc | 1,979 | Do you think they're looking beyond the present cycle toward a more distant future in evaluating the improvement in the current account, which is cyclical? | 28 |
fomc | 1,979 | Well, again, there's the oil price situation and the Iranian situation. Any forecast one would normally make would be positive for the dollar, but people are not willing to bet on that forecast given the uncertainties in the oil area and the Iranian situation. | 49 |
fomc | 1,979 | Do you see any important central bank constraint in the use of the dollar for intervention purposes because of not wanting to do damage to the dollar? | 28 |
fomc | 1,979 | They've talked of it a little but I don't see [a lot of that]. The Swiss National Bank has been careful not to sell dollars this time around. Remember, back in August their selling of dollars was one of the elements that triggered the adverse market sentiment. They finally decided that the Swiss franc had gotten so wea... | 118 |
fomc | 1,979 | Thank you. | 3 |
fomc | 1,979 | Scott, do you see any further rate changes on the horizon abroad? | 14 |
fomc | 1,979 | Interest rates? I would pray that I wouldn't but they face some of the same inflationary pressures we do. The oil price has continued to move up. Many of these countries buy their oil in the spot markets, and to the extent that spot prices have continued to rise this fall it's possible that they will have further infla... | 71 |
fomc | 1,979 | Well, I recognize the fundamentals argument. My question was really about the near term. Are you seeing or hearing any noises about changes? | 27 |
fomc | 1,979 | That's why I say I would pray that [the answer is no] for the time being since everybody has raised their interest rates--the Germans, the Japanese, the Swiss, the British, the Canadians, and I'm not sure how many more--since October 6 . The Greenbook has a list. I would hope that they're all done for the time being--f... | 88 |
fomc | 1,979 | Scott, how understanding would they be of a decline in interest rates here? If the economy weakens substantially, would they understand that? | 27 |
fomc | 1,979 | If '"they" is the central bankers, they might understand it or explain it. What has happened so far--the backing off of the funds rates and some moving back of [other] interest rates from the peaks in mid-October--has been taken in stride probably both by the central bankers and the markets. But there is some sort of t... | 95 |
fomc | 1,979 | Suppose that is accompanied by a clear control over the aggregates. Would they have pretty much the same reaction? | 22 |
fomc | 1,979 | Not everybody has the same perception of what our control over the aggregates is. It's the reading of the economy and the economy is softening. Surely if we could get better control of the aggregates as well, some people would say that's fine, the Federal Reserve is doing its job. AS long as inflation remains very high... | 105 |
fomc | 1,979 | Could I just say a word on this? At the last Economic Policy Committee meeting at the OECD, from which Charlie Schultz and I have just returned, the United States made a long presentation [on U.S. economic and financial developments], including our domestic monetary policy. Charlie and I got just three questions on thi... | 149 |
fomc | 1,979 | It sounds as if they accepted that as a reasonable outcome. | 12 |
fomc | 1,979 | They're not stupid. I think they have to accept it as reasonable, but they also figure that it means there will be dollar weakness. | 27 |
fomc | 1,979 | They're hoping the aggregates will slow and interest rates will remain high--both. | 15 |
fomc | 1,979 | I think inflation coming down will be the most convincing single thing but unfortunately we're locked into a CPI that has certain lagged features from mortgage rates and from energy. So one can't promise anything. | 38 |
fomc | 1,979 | Do you have any recommendations with respect to operations, Mr. Pardee? | 15 |
fomc | 1,979 | I have two, one with respect to current operations and one with respect to the swap arrangements themselves. Between now and December 28 we have eleven swap drawings for 1 billion 654 million dollars coming due with the Bundesbank. These are all first renewals and need no formal action by the Committee. A second renewa... | 129 |
fomc | 1,979 | Any comments? | 3 |
fomc | 1,979 | It's 88 million dollars with whom? | 8 |
fomc | 1,979 | The Bundesbank. | 4 |
fomc | 1,979 | All these are with the Bundesbank? | 8 |
fomc | 1,979 | Oh, yes. Those are the only swaps we have outstanding. | 13 |
fomc | 1,979 | SO moved. | 3 |
fomc | 1,979 | Scott, you [requested Committee approval of a renewal] in the event you do not have an opportunity to repay it. Are you optimistic on that? | 30 |
fomc | 1,979 | Well, during the last month the Bundesbank has been very helpful in channeling marks to us from their non-market transactions. That's how we have been able to repay the 300 odd million dollars worth of swaps. If the Iranian situation quiets down and we can resume these kinds of operations, the 88 million dollars is at ... | 121 |
fomc | 1,979 | I second. | 3 |
fomc | 1,979 | I share Scott's view on the present situation as to how we should proceed. I continue to think that if things quiet down and we get halfway stable markets, we ought to make it a routine to buy a few tens of millions a week or a few million a day, letting the market see that these are routine transactions in order to re... | 130 |
fomc | 1,979 | Without objection, we shall approve it. Now you have another recommendation? | 14 |
fomc | 1,979 | Yes. Between now and December 28 all of the swap arrangements themselves mature. We have arrangements with 14 central banks and the BIS and I simply recommend that I be authorized to renew them all as they stand. As you recall, last year we entered into extensive discussions with the Bundesbank over eliminating the 50-... | 225 |
fomc | 1,979 | Any discussion? If not, we need a motion. I guess we need a motion before the discussion. | 21 |
fomc | 1,979 | So move. | 3 |
fomc | 1,979 | Second. | 2 |
fomc | 1,979 | Any objections? If not, we will approve it. Having approved recommendations for the future, we better ratify the transactions for the past. Do I have a motion to that effect? SPEAKER ( ? ) . So move. | 46 |
fomc | 1,979 | If there are no objections, we shall approve them. I'd like to say that the question has arisen as to whether the Japanese--the yen has been weak, as you know--may want to draw on their swap [line with us]. We have given them a preliminary indication that in a moderate amount of, say, $ 3 0 0 million that would be all ... | 138 |
fomc | 1,979 | Well, they've seen some turn in their capital accounts. They're hoping that their trade account will turn later this year, just as a sort of very short-term bridge. They are still discussing other measures they might take if they need to on various capital controls. And they thanked us very much; they are grateful that... | 135 |
fomc | 1,979 | They have something like in reserves as I recall, so they're not exactly out of money. | 18 |
fomc | 1,979 | Well, it has been offered; whether it will be used, I don't know. Mr. Sternlight. | 22 |
fomc | 1,979 | [Statement--see Appendix.] | 6 |
fomc | 1,979 | Peter, if those two [dealer firms] are deleted, you'll have a net number of trading firms then of--? | 24 |
fomc | 1,979 | I think that would make it 34 or 35 or something close to that. | 17 |
fomc | 1,979 | You do business with 35? | 7 |
fomc | 1,979 | Yes | 1 |
fomc | 1,979 | With everyone on the list you have some activity? | 10 |
fomc | 1,979 | Well, there are a couple of firms that have been added to the reporting list with whom we do not yet trade. One that was added several years ago but hasn't quite brought itself to sufficient volume for us to trade with is the Crocker Bank. Also, Smith Barney was added to the reporting list just a few months ago and it ... | 80 |
fomc | 1,979 | What is the split between banks and nonbanks? | 10 |
fomc | 1,979 | About 1/3 of them are banks. | 10 |
fomc | 1,979 | Any other discussion? Is there a motion to approve the transactions? | 13 |
fomc | 1,979 | So moved. | 3 |
fomc | 1,979 | Second. | 2 |
fomc | 1,979 | Without objection, they are approved. We have M r . Truman and Mr. Kichline on the economic situation today--the [extended] horizons of the American economy. Mr. Truman. | 39 |
fomc | 1,979 | [Statement--seeAppendix.] | 7 |
fomc | 1,979 | What are you assuming about the oil price decision in December? | 12 |
fomc | 1,979 | We are assuming that some of it has already been taken and essentially that we're going to get a 20 percent increase in December. | 26 |
fomc | 1,979 | You said a 23 percent increase or something from this December to next December. | 16 |
fomc | 1,979 | That's for oil imports. Our actual oil import prices are reflecting the higher spot prices that are now occurring and there will be a convergence--spot prices will come down. So we're getting in the oil import prices in this quarter, as we had even last quarter, essentially the anticipation of the oil price increase re... | 66 |
fomc | 1,979 | Ted, the dollar amount then in tbis last quarter actually would average out to about what? | 19 |
fomc | 1,979 | This last quarter we have a $23/bsrrel assumption for the import price. But that's very much higher than the official posted prices, let me say, of the OPEC countries even with the increase that they've had, because of spot-- | 50 |
fomc | 1,979 | What are you assuming, say, in February or March for import prices? | 15 |
fomc | 1,979 | Well, the price goes up at about a 10 percent annual rate after the first part of the year. | 22 |
fomc | 1,979 | So you're not assuming much impact in December? | 9 |
fomc | 1,979 | We're assuming 20 percent. | 6 |
fomc | 1,979 | You said after the first part of the year it's about 10 percent. So you have a 20 percent [increase] and then a drifting up from that point. | 34 |
fomc | 1,979 | AS far as the OPEC contract prices, we have a 20 percent increase on the first of January and then 10 percent across the year. When you translate that into our import prices, that translates into a 23 percent increase fourth quarter over fourth quarter. That's because the spot market activity will be [reflecting] some ... | 90 |
fomc | 1,979 | So you're looking at a price of about $30 a barrel. | 13 |
fomc | 1,979 | About $28 a barrel; we have $28-1/4 in the fourth quarter of next year. | 22 |
fomc | 1,979 | Is your fourth quarter of 1979 price higher than you had before, too? | 17 |
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