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fomc | 1,977 | Mr. Chairman, I feel quite inadequate in trying to assess the psychological aspects of many of the current developments, but I feel rather strongly that the economic underlying factors are quite strong, and we may even see them stronger as the inventory scramble adds on to some of these other efforts here, as the infla... | 98 |
fomc | 1,977 | Thank you, Mr. Winn. Mr. Gardner now, please. | 14 |
fomc | 1,977 | I hope to be brief. The economic [situation], as Willis has just indicated, is clearly buoyant. It has rekindled more specific fears of inflation. We have to expect that. That was bound to happen whenever the economic data became clearly positive. It seems remarkable to me that with the dispensing of the rebate program... | 345 |
fomc | 1,977 | Well, all members of the Committee in attendance have now expressed their views about the lower range in targets, and before I jump to summarize and make a suggestion to the Committee, would any member of the Committee perhaps want to say an additional word at this time? Mr. Volcker. | 57 |
fomc | 1,977 | I'm afraid I left myself with a range. I'd rather retract, after listening to everybody here, with the idea of going down half a percent, as you suggested, with M2 and M3 and also a half percent on the lower end of the range of M1, as I take it Governor Wallich first suggested and others did. It has some minor symmetri... | 93 |
fomc | 1,977 | Mr. Chairman, may I just inquire the impact that the Chairman sees--the possible impact of the energy proposal would be inflationary--could you just reiterate that? I'm a little lost as to why-- | 42 |
fomc | 1,977 | Well, it's really too early for me to speak on the subject. My guess is that the energy message will tend to slow down business capital investments. Or more accurately that, as a result of the message, some projects that are now being discussed within the business community, and where business managers, boards of direc... | 175 |
fomc | 1,977 | Well, I don't think--maybe I made clear the association that I draw between the long-range targets and the rebate; it's partly the impression of increased restraint in both areas, which I did mention. But in addition, there's a real effect, and that is, the Treasury will be borrowing some $10 billion less in the period... | 190 |
fomc | 1,977 | Any other opinion or comment? If not, one conclusion is very clear, and that is that the Committee is nearly unanimous in believing that some reduction somewhere in our monetary growth ranges is indicated to be proper, appropriate at this time. The Committee is nearly unanimous on that, the consensus is quite clear. No... | 292 |
fomc | 1,977 | Chairman Burns Yes Vice Chairman Volcker Yes Governor Coldwell Yes Governor Gardner Yes President Guffey Yes Governor Jackson Yes Governor Lilly Yes President Mayo Yes President Morris Yes Governor Partee No President Roos Yes Governor Wallich Yes Eleven to one. | 49 |
fomc | 1,977 | Well, we still have time to do a little more formal business, and I shall now call on Mr. Sternlight to report on operations of the Desk. | 32 |
fomc | 1,977 | [Statement--see Appendix.] | 6 |
fomc | 1,977 | Thank you, Mr. Sternlight. Any questions for Mr. Sternlight? | 16 |
fomc | 1,977 | Is the change in the shape of the yield structure in your opinion indicative of a substantially different expectation of the market about short-term rates in quarters ahead? | 30 |
fomc | 1,977 | I would say yes, Governor. I think that what we got was a partial reversal of the swing in the yield curve that had come about in January, which had come, as you recall, just about when the Administration was announcing its fiscal stimulus plans, and this has now reversed a good proportion of that as a major part of th... | 71 |
fomc | 1,977 | Thank you. | 3 |
fomc | 1,977 | Any other question or comment? If not, a motion to ratify action that the Desk [has taken would be] appropriate. | 26 |
fomc | 1,977 | I so move it. | 5 |
fomc | 1,977 | The motion has been made and seconded; I hear no objection. We're ready for you, Mr. Axilrod. | 25 |
fomc | 1,977 | [Secretary's note: This statement was not found in Committee records.] CHAIRMAN BURNS [interrupting Axilrod statement]. You mean that in the absence of the special factors, the monetary growth rate would be 5 to 6 percentage points? | 52 |
fomc | 1,977 | Those three that I listed. Some of which were unanticipated. | 13 |
fomc | 1,977 | I see. | 3 |
fomc | 1,977 | You said 13, and you said these were 5, but [what] did you do with 8? | 24 |
fomc | 1,977 | Yes. I didn't hear it. [Statement continues.] | 11 |
fomc | 1,977 | Thank you, Mr. Axilrod. Any questions for Mr. Axilrod? | 18 |
fomc | 1,977 | The growth rates in appendix 4 for V1 and V2 are intended to be over the first quarter? | 22 |
fomc | 1,977 | Yes, it's the growth rate in velocity from the first quarter on average to the second quarter on average at annual rates. | 24 |
fomc | 1,977 | Yes. | 2 |
fomc | 1,977 | And similarly for other quarters. | 6 |
fomc | 1,977 | Yes, Mr. Morris. | 6 |
fomc | 1,977 | Steve, do we know in advance that the Social Security Administration is going to issue checks early? | 19 |
fomc | 1,977 | Yes, we made an effort to allow for that. Of the three special factors I mentioned, that one we allowed for possibly not enough. | 28 |
fomc | 1,977 | You mean the seasonal adjustment factor was changed, or just how did you? | 15 |
fomc | 1,977 | When a Saturday or Sunday is the third day of the month, they put out the Social Security payment on the preceding Friday. Ordinarily, they pay it out on the third day of the month. And that puts it in M1 for a couple of extra days for the monthly average. So you get about a 1-1/2 to 2 percentage points impact on a mon... | 157 |
fomc | 1,977 | Any other questions? | 4 |
fomc | 1,977 | Steve, is the timing and magnitude of the tax returns giving you any problem this year? | 18 |
fomc | 1,977 | Well, they may be. I can't explain why, in the week preceding the tax period, M1 ought to be relatively strong. It doesn't make sense to me that people have accumulated deposits in order to pay their taxes in advance. That seems to be something of what's happening. | 56 |
fomc | 1,977 | Why doesn't that make sense to you? | 8 |
fomc | 1,977 | Because it hasn't happened in earlier years. In the abstract it makes sense, but then I would not have expected the phenomenon just this year and last year. That's the problem I have with it, and I don't have enough information to say that the tax payments are becoming larger, or how people might be varying their payme... | 81 |
fomc | 1,977 | It could be also on the other side of the extreme, people may be filing returns and you're getting the rebate-- | 23 |
fomc | 1,977 | Well, the refunds are coming in. We may not be allowing for them properly, but the refunds are coming in pretty much exactly as we have projected. | 31 |
fomc | 1,977 | The magnitude and timing? | 5 |
fomc | 1,977 | Yes, and there is no extra. Refunds in this early week in April were almost exactly as we projected and are not substantially more than they were last year. [They are] about the same as last year. So the refund pattern is not in itself causing us to go off in the sense that we--what is occurring is what we had expected... | 110 |
fomc | 1,977 | Wouldn't that wash out right away, the tax effects? | 12 |
fomc | 1,977 | Refunds? | 3 |
fomc | 1,977 | No, no, the tax. If people were accumulating for the taxes, now IRS separates those checks and [the money balances are drawn down]? | 29 |
fomc | 1,977 | That's right. We are projecting a drop in the money stock of some magnitude after the week ending April 20. We did not project a drop in the week of April 20 because of the averaging effect, presuming these aren't paid until the end of the week and a little more mobilization occurs. But we are projecting a drop, and th... | 87 |
fomc | 1,977 | Any other question or comment? Gentlemen, we still have to make our decision with regard to our two-month ranges and the domestic policy directive. The clock is not supposed to be accurate. What is the time? Well, at 6 minutes to 1 there is a chance that if we stayed until 1:30 we could finish this meeting. Now what is... | 101 |
fomc | 1,977 | Let's go ahead and finish. | 6 |
fomc | 1,977 | Let's go ahead. Is that the sentiment? Well, let's try. In the interest of preventing pangs of hunger on the part of members of the Committee--that would be a short-run misfortune, but still a misfortune--in the interest of preventing that, let me make a suggestion to the Committee. By and large, I find alternative B a... | 146 |
fomc | 1,977 | I was ready until you did that last thing. I was going to buy alternative B all the way across the board because I thought it was reasonable, as we've done in the past with the rise in [unintelligible] stability at this time of considerable uncertainty, and the impact of the rebate program. All of which I think is more... | 131 |
fomc | 1,977 | That's where our aim's been. | 7 |
fomc | 1,977 | The difference between us is very small really. In view of my suggestion of an asymmetrical midpoint, the 4-1/4 strikes me as unrealistic. That is, we're not going to get down to 4-1/4--that played some role in my own thinking. Well, let me not elaborate, but move on. Mr. Partee. | 74 |
fomc | 1,977 | Well, I think I would find this acceptable, your suggestion. I think you're right. It's hard to imagine us getting down to 4-1/4 with an April number, but this, I think, is likely to hold up and be quite a high number. So even if you had indications on a very low May number, why, putting the two together, the chance [i... | 235 |
fomc | 1,977 | Well, we function under a rule which requires that. We might want to modify it, but that is the rule. | 24 |
fomc | 1,977 | No, we didn't move very much when we got evidence that the aggregates were beginning to strengthen. | 19 |
fomc | 1,977 | That came toward the very end of the intermeeting period. Mr. Jackson. | 16 |
fomc | 1,977 | That's one reason I'd accept your proposal, except I would go to the midpoint instead of having an asymmetrical midpoint. I'd go to the natural midpoint, if there is such a thing. | 37 |
fomc | 1,977 | Well, it's arithmetically possible. Mr. Volcker. | 14 |
fomc | 1,977 | It seems to me we're in a little bit of a peculiar position here. These aggregates did go up at the end of the period; we didn't react to them--I think quite properly. But if we now take off from the top of the range we had last time--or even beyond it, I guess, in some cases--then we add to it some extraordinarily hig... | 291 |
fomc | 1,977 | What are the two months on M1 Steve? Are they 13 and 3? | 18 |
fomc | 1,977 | Yes. | 2 |
fomc | 1,977 | May looks like 3. | 6 |
fomc | 1,977 | But combined, that comes out--well, in the Board's estimate--8. | 17 |
fomc | 1,977 | I don't know what May looks like. | 8 |
fomc | 1,977 | Yes, I don't know what May looks like either, and I'd like to get a little closer before I do anything. | 24 |
fomc | 1,977 | Yes, but he said that if you came in as high as these numbers, and that would mean you come in looking like 3 for May. | 30 |
fomc | 1,977 | But 13 for April, which leaves you an average of 8. Which is pretty high for a two-month period for no reaction. | 28 |
fomc | 1,977 | All right. Mr. Eastburn, please. | 10 |
fomc | 1,977 | If I understand Paul's position, I think I can also support that. It seems to me that we should be prepared to let the funds rate go up. But had we had more time last time, we probably would have done so. And I can buy your range, Mr. Chairman, of 4-1/2 to 5-1/4, but I really think we should be ready to move that promp... | 110 |
fomc | 1,977 | Thank you, Mr. Eastburn. Mr. Mayo, please. | 14 |
fomc | 1,977 | I like your prescription of 4-1/2 to 5-1/4 Mr. Chairman. I would keep the M1 and M2 ranges just where they are. I would prescribe though, a continuation of our idea of an asymmetrical inner range, and 4-3/4 to 4-7/8 appeals to me as permitting probably the degree of flexibility that we need. I would interpret it in the... | 114 |
fomc | 1,977 | Thank you, Mr. Mayo. Mr. Black, please. | 13 |
fomc | 1,977 | Mr. Chairman, I think we're presented with essentially the same problem we had last month in trying to separate out unusual seasonal factors from the underlying demand for money. In fact, we wouldn't be surprised to see these aggregates coming in somewhat stronger than the staff is estimating, but we believe that if th... | 212 |
fomc | 1,977 | I'm lost. | 3 |
fomc | 1,977 | It's page 3, Mr. Chairman. | 9 |
fomc | 1,977 | Page 3. How would you have that read? | 11 |
fomc | 1,977 | Lines 46 and 47, where it says "would deviate significantly from the midpoints" I would change that to "moving beyond the limits of the indicated ranges." Now that may not sound consistent with my hawkish-- | 46 |
fomc | 1,977 | You are going all the way up to 10 before you move? | 14 |
fomc | 1,977 | Yes, because of special factors at work, really. That's my feeling. Anything up there-- | 19 |
fomc | 1,977 | You and Paul are taking exactly the reverse-- | 9 |
fomc | 1,977 | I'll apply his language for lower limits. | 8 |
fomc | 1,977 | And I'm sure mine seems inconsistent with my earlier hawkish position, but I think you've got some special factors here that we ought not react to unless they turn out to be really a manifestation of strengthening demand for money. If it goes beyond that, yes, I think it clearly is, but up to that point I'm not sure. I... | 78 |
fomc | 1,977 | That's just the money market directive without saying it. | 10 |
fomc | 1,977 | That's right. I have a bias in favor of the aggregates directives, is what it amounts to, and I just like to stay there in this particular case. With special factors at work, I'm willing to compromise my ideals to a certain extent. | 49 |
fomc | 1,977 | That's the same wording as in the money market directive, essentially. | 13 |
fomc | 1,977 | I hadn't thought about making a suggestion, but as long as Mr. Black [is] talking about [it], our wording was to move toward the upper limit rather than deviate significantly. | 38 |
fomc | 1,977 | These are really very, very subtle nuances. | 9 |
fomc | 1,977 | I think you may well be confronted with a situation where you've got to move up beyond 4-3/4 if you adhere to this language, and it may well not be warranted, maybe it will, I don't know. Whether that's [indicating] real demand for money or these special factors that Steve's outlined, I'm inclined to think [it would be... | 95 |
fomc | 1,977 | Well, we'll come back to the language later on. Thank you, Mr. Black. Now Mr. Kimbrel, please. | 27 |
fomc | 1,977 | Mr. Chairman, I think the numbers are perfectly acceptable as you assigned them. Except at the midpoint, I guess I have to be more leaning away from asymmetrical. I'd like to see it [at the] actual midpoint, and maybe not too far away. | 53 |
fomc | 1,977 | Thank you, Mr. Kimbrel. Who would like to speak next? Mr. Guffey. | 22 |
fomc | 1,977 | Mr. Chairman, I particularly like your proposal on the federal funds range. And it seems to me that the argument Mr. Volcker makes with respect to the M1 and M2 ranges is appropriate. I would also, I guess, like to speak to the point that Bob Black makes. I would like to see an aggregates directive, retaining the langu... | 116 |
fomc | 1,977 | Thank you, Mr. Guffey. Mr. Wallich now, please. | 17 |
fomc | 1,977 | Well, I have no quarrel with the aggregates of B, given the uncertainties. I'm a little troubled by the long stability of the funds rate. I think we're in danger of accustoming the market too much to that. Also, I think that there might be more real pressure on the aggregates than we think and less of a noise element. ... | 111 |
fomc | 1,977 | Thank you, Mr. Wallich. Who would like to speak now? | 15 |
fomc | 1,977 | Mr. Chairman, I have found some support for my concern about a 10 outer limit on an M1 growth. I'd like to see that range 9-1/2 or something. I guess it's a point of principle with me. I believe we do have special factors, but I believe they're also indigenous to April at the moment until proven otherwise. If we get a ... | 213 |
fomc | 1,977 | Thank you, Mr. Gardner. Yes, Mr. Morris. | 13 |
fomc | 1,977 | Mr. Chairman, I support your proposal. Even though the difference between 9-1/2 and 10 is pretty small, as these things go, I think, given the fact that this bulge is the bulge of only one week at the moment, I wouldn't be comfortable [with] even that modest narrowing of the range. I would like to stay with the origina... | 79 |
fomc | 1,977 | Thank you, Mr. Morris. Mr. Willes, please. | 14 |
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