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5.57k
fomc
1,980
Well, they could.
5
fomc
1,980
It's raising depending upon where we begin.
8
fomc
1,980
Well, it seems that we'd very likely do something if it came out there. Even I would be prepared to do that.
25
fomc
1,980
You say raising on average. Depending on what one is looking at, it's accepting the upper constraint of alternative III on M1. That's the one you're worried about.
33
fomc
1,980
Well, I was more worried about M2, and there we have an increase. Raising the lower constraints on M-1A and M-1B doesn't really accomplish anything.
36
fomc
1,980
Well, let's try this one. I appeal to you: Anyone around this table who is good enough to know the difference between 1/2 point, with great [conviction], is pretty good.
41
fomc
1,980
Is that for simple or complicated minds?
8
fomc
1,980
Does it have any appeal?
6
fomc
1,980
I'd vote for it.
5
fomc
1,980
Want another straw vote?
5
fomc
1,980
Just to be sure I am with you, read those numbers one more time.
16
fomc
1,980
They are: 3-1/2 to 6 on M-1A; 4 to 6-1/2 on M-1B; 6 to 9 on M2; and 6-1/2 to 9-1/2 on M3. Who finds that acceptable?
65
fomc
1,980
Here we go!
4
fomc
1,980
Eight.
2
fomc
1,980
And I make nine.
5
fomc
1,980
What did we finally get on the vote for straight alternative III?
13
fomc
1,980
I think about the same.
6
fomc
1,980
I had seven, not counting--
7
fomc
1,980
Seven, not counting me. So we got one more vote out of this one, right? Let's go with that one then. All the people who like narrow ranges ought to be enchanted by that 1/2 percent [reduction in the ranges for M-1A and M-1B].
61
fomc
1,980
The narrower M1 range.
6
fomc
1,980
Which one did you go with, the last one?
11
fomc
1,980
Yes.
2
fomc
1,980
I thought we had more votes for alternative III.
10
fomc
1,980
I thought so, too.
6
fomc
1,980
Try again.
3
fomc
1,980
No, I had seven not counting the Chairman. Want to try it again?
16
fomc
1,980
What was the vote on the last one, Murray?
11
fomc
1,980
Eight plus the Chairman.
5
fomc
1,980
I think the Chairman is saying that we may have had more votes on that, but those who are the unhappiest would find this last one acceptable. Is that your reasoning, Mr. Chairman?
40
fomc
1,980
I don't know quite what I will find at this point, frankly.
14
fomc
1,980
I can go either way.
6
fomc
1,980
In light of this vote, I'll shift from my last vote and make it even. I voted for alternative III in the spirit of compromise, but now that I know we can get 8 votes for this, which is more acceptable to me, I would like to switch my vote and make it [9].
62
fomc
1,980
Let's have a vote on this compromise and see what we get.
13
fomc
1,980
Maybe I ought to reactivate my proposal?
9
fomc
1,980
Let's take a vote on the latest proposal. Is everybody clear about what we are voting on?
19
fomc
1,980
The same thing that we just voted on.
9
fomc
1,980
That's right, the 3-1/2 to 6, 4 to 6-1/2, 6 to 9, and 6-1/2 to 9-1/2.
45
fomc
1,980
What about bank credit? Are we going to have to put that in?
15
fomc
1,980
Bank credit, I guess, is 6 to 9 percent.
14
fomc
1,980
6 to 9.
5
fomc
1,980
What about M2?
5
fomc
1,980
Henry thinks it's too high.
6
fomc
1,980
If we expect to get it, we're going to have to raise marginal reserves.
16
fomc
1,980
Chairman Volcker Yes President Balles Yes President Black Yes Governor Coldwell Yes President Kimbrel It's mighty hard, but I vote yes, too. President Mayo Yes Governor Partee Yes Governor Rice Yes Governor Schultz Yes Governor Teeters Yes First Vice President Timlen Yes Governor Wallich In the spirit of compromise, ye...
64
fomc
1,980
Well, I appreciate your swallowing all these 1/2 percentage point differences! I think it's probably more important to swallow the 1/2 point differences than to achieve the 1/2 point.
41
fomc
1,980
Well, can we swallow something real now?
9
fomc
1,980
Yes. After all this time, we have a great decision. How much problem are we going to have with our even narrower differences on the short-run ranges? Do you want to try to do this [before lunch]?
44
fomc
1,980
Yes.
2
fomc
1,980
Maybe we can just vote without any statement from anybody. It might be better.
16
fomc
1,980
Yes.
2
fomc
1,980
Let's see where we are without going around the table. Do you want to say a few words, Mr. Axilrod--very few?
29
fomc
1,980
I will skip the introductory part, a page and a half, which says that interest rates aren't projected to come down as much as they used to be because the economy is projected to be stronger. [Secretary's note: For the full text of Mr. Axilrod's statement, see Appendix.]
60
fomc
1,980
If I understand this precisely, your alternative B, at least for M1, reiterates the target we already set at the last meeting.
28
fomc
1,980
Yes.
2
fomc
1,980
And this can viewed as kind of a mid-quarter relook at that.
15
fomc
1,980
That's right.
3
fomc
1,980
But M2 is a little below, right?
10
fomc
1,980
The [new] M2 is a totally different concept.
12
fomc
1,980
We didn't set a target for that.
8
fomc
1,980
That's right. It was the old M2--
10
fomc
1,980
That target was 7 percent; that's what confused me.
12
fomc
1,980
That's right. And it is in fact running a little low relative to the target.
17
fomc
1,980
But you think this 6-1/2 percent that you have here for the new M2 is roughly consistent with the 7 percent that we had on the old M2?
37
fomc
1,980
I would guess it's a shade lower because the old M2 is running a shade lower. It's either consistent or a shade lower. I haven't worked it out in detail month by month on money market funds.
41
fomc
1,980
But it contains very different components.
7
fomc
1,980
Oh yes, that's right. That's why. It has money market funds--
15
fomc
1,980
But it has been running higher than 6-1/2 percent, apparently, because you have the implied growth for January to March of 5-3/4 percent.
36
fomc
1,980
Yes. The actual growth in M2 is 8.3 percent because, among other reasons, we had this very sharp expansion in money market funds in January, which we've been expecting to slow.
40
fomc
1,980
There's a question of procedure we have to decide upon, which is whether to reiterate or change the targets that we had for the first quarter. [We can comment on] any tentative feeling that we have about the second quarter but we don't have to put the second quarter into the directive, and I think it's probably inappro...
102
fomc
1,980
To be clear, Mr. Chairman, alternative B, as we construe it, is simply reiterating the Committee's policy of last time with respect to M1.
34
fomc
1,980
Right.
2
fomc
1,980
That's in new terms and takes account of the actual growth that occurred in January.
16
fomc
1,980
And in both cases--just slightly in the case of Ml and a little more than slightly in the case of M2--the rate of growth in January was above our targets [for the quarter].
40
fomc
1,980
Yes. But, again, this is a totally different M2.
14
fomc
1,980
Yes, after we translate them.
7
fomc
1,980
But the old M2 is running a little lower relative to target than we had expected.
18
fomc
1,980
So if we take alternative B, conceivably we could shade it a bit in the light of our earlier discussion. But I think we're talking--
30
fomc
1,980
I think what we'd shade is the second quarter. After all, the first quarter--
17
fomc
1,980
Well, that would be my inclination. Looking at this in view of what we just decided, the second quarter figures may be a little high. But we don't have to decide upon that now. Otherwise, what you're saying is that "B" is basically reiterating what we said before, which does imply a little slower growth rate in Februar...
173
fomc
1,980
Are we content with a point target here? Is that the way we should read this?
18
fomc
1,980
This is the central tendency, obviously. Last time we worded it 4 to 5 percent on Ml. We could raise the question again of whether we want to continue with that wording. We said 4 to 5 percent on M1 and about 7 percent on M2. I suppose what we'd be saying here is that the Committee reiterated--if you want to word it th...
108
fomc
1,980
There could be some argument, Paul, that we're farther along in the quarter and should narrow that range. Or we could say 4-3/4 percent, which is--
36
fomc
1,980
Well, I don't feel strongly about that. Even on the new technique we're not that close. This is a pure matter of preference; we can word it either way. I don't have any--
39
fomc
1,980
I would prefer to word it "4 to 5 percent."
13
fomc
1,980
I think there's a lot to be said for stability from month to month in these directives, unless there's a major reason to change.
26
fomc
1,980
Particularly if we keep that same wording, we'd be a little hard pressed to [rationalize] changing it by a quarter percentage point, which one could argue we might want to do on the basis of the long-term range, all else being equal. But that's such a fine adjustment. More substantively one could argue, given what's go...
81
fomc
1,980
I would argue for alternative C with a borrowing level of $1.6 billion.
17
fomc
1,980
1.6?
4
fomc
1,980
That is about what they had, $1.5 billion, for alternative C.
17
fomc
1,980
I think "C" is clearly saying, given what we know now that we didn't know last time, that you want to be a little tighter.
30
fomc
1,980
I think we should stick to where we were.
10
fomc
1,980
"B" says that we want to play it about where we've been playing it; "A" says we distinctly want to be a little easier. I think those are the choices here.
37
fomc
1,980
I'd keep "B."
5
fomc
1,980
Yes, I think we ought to stay where we were until we go off in a big way, which we'll do soon.
25
fomc
1,980
While I prefer what Phil Coldwell said, I would vote for "B."
16
fomc
1,980
Are there any other comments? I really don't want to rush this, but I think we ought to go to lunch if we don't have a consensus here. If there's a lot of argument that we should be distinctly tighter or if the differences are massive, [maybe we should break for lunch]. In fact if we took "C," I think we would have to ...
89
fomc
1,980
They have $1.5 billion in the Bluebook.
12
fomc
1,980
The measure of tightness in the face of higher inflation is not the money supply. It is really the interest rate, or the real interest rate. I see that as having come down.
38
fomc
1,980
It depends upon whether you're looking at the long-term or the short-term rates.
16
fomc
1,980
It doesn't bother me to tighten the money supply, not because I think that's the proper response but because I think it will have the desired result.
29