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5.57k
fomc
1,980
I would prefer that.
5
fomc
1,980
John wants the top of the range below last year's [actual].
13
fomc
1,980
I want the top of the range at least moderately below.
12
fomc
1,980
I understand what he proposed. He's just taking a somewhat mechanistic approach. But I am thinking of what actually happens in the economy. It seems to me that if we're going to go away from alternative III, which is the alternative I continue to prefer, where we should ease is in M2 and M3 rather than the other way ar...
79
fomc
1,980
Well, that seems to be a bit in line with Mr. Axilrod's suspicions, for whatever that's worth. On the other hand, it doesn't achieve Mr. Balles's visual purpose.
41
fomc
1,980
I don't understand that there's any particular reason to ease on M-1A and M-1B because I have some real questions about velocity. But if Mr. Axilrod is right, the figures on M2 and M3 are likely to be more stringent than those on M-1A and M-1B.
66
fomc
1,980
Do you all realize that alternative III means essentially no decline in interest rates this year?
17
fomc
1,980
That's what the staff says. I have a little uncertainty about what that figure--
16
fomc
1,980
Is that a proposal, Mr. Chairman?
9
fomc
1,980
Well, I can't have too many proposals on the table at the same time. I don't know whether Mr. Balles wants to retreat to Mr. Schultz. I am willing to try your original one and just see [what support it commands].
49
fomc
1,980
I would be interested in the vote on my proposal. I didn't see a show of hands yet.
20
fomc
1,980
What we're talking about now is what is acceptable to the biggest group we can get, I think. I can try the Schultz alternative, too, to confuse the issue further, but let me try the Balles alternative at this stage.
47
fomc
1,980
You got 3-1/2 votes.
10
fomc
1,980
Well, let's try the Schultz alternative. This is exactly the opposite. Alternative III on M-1A and M-1B and alternative II and M2 and M3.
36
fomc
1,980
This just means acceptable, not necessarily preferable?
9
fomc
1,980
This means acceptable. That is precisely right. Are we really saying nothing is acceptable here?
18
fomc
1,980
Well, I got more than he did!
9
fomc
1,980
No, you didn't.
5
fomc
1,980
I got 5 votes.
6
fomc
1,980
The only thing I am convinced of is that we are in a range where the differences are very difficult to perceive.
23
fomc
1,980
It's [as if we] perceive more [differences] than there really are.
17
fomc
1,980
You had 8 for alternative III, Mr. Chairman.
12
fomc
1,980
You sure did. And that was a preference, not just acceptable.
14
fomc
1,980
Well, I am a little reluctant to go to alternative III. It is clear that that has a plurality, but whether it is the one that maximizes the satisfaction around the table is another question.
40
fomc
1,980
Well, I can't really offer a compromise since I was for alternative I.
15
fomc
1,980
You were the only one. Maybe you're the only one who can offer a compromise.
17
fomc
1,980
We can't possibly get close.
6
fomc
1,980
Just looking at what maximizes satisfaction for all, I urge again the Balles approach with a more sympathetic attitude by people around the table.
28
fomc
1,980
Maybe somehow it will work out.
7
fomc
1,980
Is there any understanding as to where in the range the Desk would be shooting for?
17
fomc
1,980
Well, theoretically, we are shooting for the midpoint, based on what we know now. We may modify that in the short-run decision; we haven't gotten there. But for the year as a whole the implication is that the best judgment we can make is that we're shooting at the middle of all of these, which gives us some leeway on [...
92
fomc
1,980
My presumption, Mr. Chairman, is that of course we would aim for the midpoint, but I would also very quickly add that in view of all the uncertainty we would want to be able to move either way, including to the top of the range. I think we ought to keep that flexibility.
61
fomc
1,980
I would agree with that. But as of now I think we are saying the central tendency is the midpoints of these ranges, which gives us some potential leeway in deliberately moving away from the midpoint and also gives us some leeway in the reconciliation among these various numbers. I suppose the implication of that, to se...
167
fomc
1,980
Mr. Chairman, if the Committee is willing to accept a range of 2-1/2 points, an almost perfect compromise is to take the bottoms of alternative II and the tops of alternative III.
41
fomc
1,980
That's not a bad idea.
6
fomc
1,980
I'd feel more comfortable with that than with the Balles approach.
13
fomc
1,980
Did you say leave these where they are?
9
fomc
1,980
3-1/2 to 6 percent.
10
fomc
1,980
You're narrowing all the ranges.
6
fomc
1,980
The bottoms are from alternative II and the tops are those in alternative III.
15
fomc
1,980
That runs counter to a clear majority view about keeping a wide range.
14
fomc
1,980
Yes, it does.
5
fomc
1,980
But it appeases some of the rest of us.
11
fomc
1,980
That results in odd midpoints.
7
fomc
1,980
You obviously know [the area we're in]. I really am resistant to getting down to 1/4 points. If what we're aiming at for M-1A is halfway between [the midpoints of] alternatives II and III, [that difference is] 1/4 of a percentage point and I think we're really there with the Balles approach as a practical matter.
76
fomc
1,980
Are we not likely, though, to end up with a situation in which we're going to miss on both sides with the Balles approach? M2 and M3 may be strong and M-1A and M-1B could be pretty weak.
51
fomc
1,980
Presumably these are the best estimates we have. I will not vouch for the inter-relationships between them. [They represent] an unbiased estimate of the consistent--
34
fomc
1,980
We rounded these to 1/2 points, by the way. For M2 and M3 I think the [actual] differences are 1/4 points among the alternatives.
37
fomc
1,980
We're now unrounding them. Let me urge upon you at this point the Balles alternative. How many find that acceptable after this further [discussion]?
31
fomc
1,980
To show you how weak I am, I'll vote for it. As I do so, I am being dragged kicking and screaming into this. I would much prefer the other.
35
fomc
1,980
How many was that, sir?
7
fomc
1,980
Six.
2
fomc
1,980
If I [add my vote], it's a majority. But I can't believe that when we get down to a 1/4 point there is no combination of numbers that does not provide a happier situation.
41
fomc
1,980
Could you try Steve's range, because its width is 2-1/2 points as opposed to 3?
24
fomc
1,980
And not emphasize midpoints?
6
fomc
1,980
But there's no substantive difference between them.
8
fomc
1,980
But it's the way it is perceived.
8
fomc
1,980
It is the way it is perceived by the public, Paul, that's important. I agree there isn't all that much difference but the perception by the public--
31
fomc
1,980
It's the top of the ranges that scares me to death.
12
fomc
1,980
We could widen the range to 3 to 6-1/2.
16
fomc
1,980
Well, I don't think we want to go in the direction of widening the range. There are all sorts of ways we can get a quarter peoint difference between the averages.
35
fomc
1,980
But the problem, Mr. Chairman, is not the quarter point difference on the midpoint. Where people separate is on where they think the bottom ought to be or where the top ought to be. And that's why Steve's proposal, I think, will get most of the votes. It's not the quarter point difference; it's where one is willing to ...
79
fomc
1,980
I think that's a correct appraisal. I think the market will look at it that way, too.
20
fomc
1,980
We have a tremendous amount riding on our ability to be within these ranges--SEVERAL. Yes.
21
fomc
1,980
--and to cut the range to 2-1/2 points makes it rough. And the possibility of inconsistencies here, even though we are within the staff's ranges--
36
fomc
1,980
What are we talking about specifically?
7
fomc
1,980
3-1/2 to 6 percent.
10
fomc
1,980
Why don't we just see what the vote is, Mr. Chairman, on the bottom of alternative III and the top of alternative II, widening the range by 1/2 percentage point.
38
fomc
1,980
That's what I suggested, but he--
8
fomc
1,980
It has some merit.
5
fomc
1,980
If we want to compromise, we should go to 3-1/4 to 6-1/4 percent.
25
fomc
1,980
That's the straightforward compromise, but I think we look foolish if we get into quarter points.
18
fomc
1,980
We would bill the 3-1/2 percent [as appropriate] on the grounds of the great uncertainty in the year ahead.
27
fomc
1,980
We could accept Steve's [suggestion] as long as we don't focus on the midpoint. The midpoint gives us a quarter point and looks foolish. A narrower range, other things equal, looks better. I see the risks; we might miss. We're much more likely to miss on the up side than on the down side.
66
fomc
1,980
What I foresee is the possibility of misses if the relationships aren't right here. We may be within on M1 and out on M2 and M3.
31
fomc
1,980
If we do it the other way, we have a better chance of being within something.
18
fomc
1,980
But that's precisely why people care so much about either the bottom or the top. Even though we may miss, if we're going over the top, that raises the flag a lot faster than if we're still within all the ranges.
45
fomc
1,980
I have noticed that people worry less when we go under than when we go over.
17
fomc
1,980
It depends on one's point of view.
8
fomc
1,980
Well, I'll go back to my original question. What are you going to say about last year's ranges?
21
fomc
1,980
About last year's ranges?
5
fomc
1,980
People are going to compare ranges and ranges, not--
11
fomc
1,980
Well, what we're going to tell them is that on M1, depending upon how you look at it, we were somewhere around 5.5 or 6.8 percent.
37
fomc
1,980
That's what we hit, but [the question is]: Are we setting our objectives lower or higher?
20
fomc
1,980
All of these objectives, properly interpreted, will be lower. It may take some interpretation.
18
fomc
1,980
But didn't we say 3 to 6 percent last year on Ml? Sure it has changed, and so forth--
24
fomc
1,980
Well, we said 4-1/2 to 7-1/2 percent by one interpretation, with 1-1/2 percent ATS--
32
fomc
1,980
That's really what it was, when you come right down to it.
14
fomc
1,980
Well, I don't like this way of skinning the cat, but do you want to do these 2-1/2 percentage point ranges? Let's see who finds the 3-1/2--
42
fomc
1,980
What are we talking about? The 2-1/2 points?
15
fomc
1,980
Yes.
2
fomc
1,980
John, I assume you'll go with this proposal.
10
fomc
1,980
Well, we get no more votes for that one than the other one.
15
fomc
1,980
Straight alternative III got the most votes.
8
fomc
1,980
No, I don't think so.
7
fomc
1,980
Take an acceptable vote on alternative III; I think you'll get 9 out of 12.
19
fomc
1,980
Mr. Chairman, another compromise would be to take a flexible midpoint. Take the [average of the] midpoints from alternatives II and III and say you expect variations around that of 1-1/2 percentage points on either side, as we have in the past.
55
fomc
1,980
That would be 3-3/4 to [6-3/4 for M-1B].
22
fomc
1,980
It gets us to quarters.
6
fomc
1,980
Would it help, Mr Chairman, if we used M-1B as opposed to M-1A as the starting point?
26