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fomc | 1,980 | Mr. Chairman, I think it's more than the process. There is a very fundamental issue at this stage. The way this meeting is going and the way opinion is apparently evolving, we are getting right back to setting interest rate ranges and the stabilization of interest rates, and I could not go along with that. I think we'r... | 81 |
fomc | 1,980 | There is no compromise, either. | 7 |
fomc | 1,980 | Right. | 2 |
fomc | 1,980 | We will unquestionably have a difference of opinion at that end of the table, anyway. But I think we've got to resolve it. | 26 |
fomc | 1,980 | Mr. Chairman, there's another question we need to deal with, and that is whether we mention specific short-run numerical targets in the directive. If we narrow the ranges and don't mention any targets, it's going to be viewed as more than cosmetic when people find that out. I think they will conclude essentially what L... | 95 |
fomc | 1,980 | We have been doing that, haven't we? | 9 |
fomc | 1,980 | Yes we have. | 4 |
fomc | 1,980 | [I thought] 7 percent growth in M-1A was the target. | 16 |
fomc | 1,980 | Well, we have a [draft] directive that is written in more general language. I'm not sure I'm completely happy with it but I can't think of an alternative. Mr. Axilrod could not think of an alternative. If someone has a bright idea, we can-- | 55 |
fomc | 1,980 | The alternative was to put down 7 percent, say, if that's what you voted for. It would be stated in the Policy Record very clearly that 7 percent was the target but that you would permit some overshoot. Our thought behind not putting specifically in the directive a number for growth over a two- or three-month period wa... | 168 |
fomc | 1,980 | The presumption was that the specifics that Steve had in mind would be in the Policy Record. The alternative was putting in at least 7 to 7-1/2 percent [in the directive] and some language saying that we'd tolerate some growth above that. Now, we're talking about the period before the next meeting only. | 66 |
fomc | 1,980 | Yes, that's the other thing that bothered me a little because [that would cover] only two months and that seemed like a very short period to focus on particular aggregates. It gives a sense of short-run control over the aggregates. | 46 |
fomc | 1,980 | I suppose we could say just what you have here: "In the short run, the Committee seeks expansion of reserve aggregates consistent with growth of M-1A...." Maybe we should leave out the "over a period of months." And then we can say that in the period before the next meeting, or over the two months, the aim will be to a... | 95 |
fomc | 1,980 | I think it's a bad precedent to start being that specific in the public record. I'm not arguing now for any particular policy. I'm just talking in terms of the long run. | 35 |
fomc | 1,980 | We're going to miss it, you know, one way or the other. | 15 |
fomc | 1,980 | We might miss it and, of course-- | 9 |
fomc | 1,980 | We could say: "...seeks expansion over the next two months of M-1A, M-1B and M2 at rates high enough to promote achievement of the Committee's long-run objectives." It implies higher growth than the long-run targets without being at all specific about it. | 58 |
fomc | 1,980 | We can say "growth over the first nine months of 1980" or something like that, essentially what we've done in the past. | 28 |
fomc | 1,980 | I vote for keeping Steve's language. I think we'll get into less trouble later on. | 18 |
fomc | 1,980 | Well, it's really not at all specific. | 9 |
fomc | 1,980 | What was your language, Governor Partee? | 9 |
fomc | 1,980 | "Seeks growth in these aggregates over the next two months at rates high enough to promote achievement of the Committee's longer run objectives." Then we could [cite] the monetary growth over the first nine months of the year, or something like that. | 50 |
fomc | 1,980 | We'd have to put in some modifier about over what period of time, because otherwise it would sound as if in the next two months we are going to-- | 32 |
fomc | 1,980 | Well, to seek growth over the next two months at a rate high enough to promote achievement of the Committee's long-run objectives implies the whole year. Or you could go to a nine-month [figure]. We were trying to avoid deciding at this point whether you were getting back in the range by September or December. | 63 |
fomc | 1,980 | Maybe it ought to be modified. | 7 |
fomc | 1,980 | I think we ought to be specific and say "promote its longer-run objectives for the year" or something like that. | 25 |
fomc | 1,980 | Yes, that's what we had in mind. | 9 |
fomc | 1,980 | Everybody has a gut feeling. My gut feeling is that we're going to find M2 and M3 coming up better than Ml in terms of the targets. | 31 |
fomc | 1,980 | Well, they did when the money supply was running so fast last summer. They've been within their targets all along. | 23 |
fomc | 1,980 | M3 has touched the upper end and the lower end, but has remained well within the [band] on average, which is more than M1 has done. Well, we have a substantive question to decide here. I take it that wording of the directive is reasonable? | 55 |
fomc | 1,980 | But we have to have point estimates for our growth targets for May-June in order to establish some reserve [objectives]. You never specified what you wanted those to be. | 35 |
fomc | 1,980 | Well, no I didn't. | 6 |
fomc | 1,980 | Those point estimates would appear in the Policy Record? | 10 |
fomc | 1,980 | No, for voting purposes. | 6 |
fomc | 1,980 | I'm saying 7 to 7-1/2 percent, I suppose, but with tolerance on the up side. | 24 |
fomc | 1,980 | What about M-1B? | 7 |
fomc | 1,980 | I'm just working off Steve's numbers. You had what--a little less than 8 percent for M-1B? | 25 |
fomc | 1,980 | Well, 7-1/2 to 8 percent [for M-1B] would be consistent with 7 to 7-1/2 percent for M-1A. And for M2 I would say 7-3/4 to 8-1/4 percent would be consistent. | 64 |
fomc | 1,980 | So you are going the alternative A route? | 9 |
fomc | 1,980 | This is broadly consistent with alternative A, with a willingness to overshoot. | 15 |
fomc | 1,980 | If fortune should smile on us. | 7 |
fomc | 1,980 | At this point I don't know what fortune | 8 |
fomc | 1,980 | What is the M2 consistent with that? | 9 |
fomc | 1,980 | Around 8 percent. | 5 |
fomc | 1,980 | We're talking about figures for the actual path. That's not quite the equivalent of the figures [mentioned here], which are for a longer period. We're just talking about now through the meeting date in July. | 40 |
fomc | 1,980 | Yes. | 2 |
fomc | 1,980 | Logic would have [unintelligible]. | 9 |
fomc | 1,980 | In a completely symmetrical world, but I'm not playing in a symmetrical world right now. | 17 |
fomc | 1,980 | Well, you have taken the fed funds range that is consistent with the staff's alternative B. | 19 |
fomc | 1,980 | With "B." That is correct. | 8 |
fomc | 1,980 | In fact, if you want to make the switch, I think we could do it the other way. | 21 |
fomc | 1,980 | And you want to put in a 9 percent funds rate with consultation at 9-1/2 percent, did you say? | 27 |
fomc | 1,980 | Yes, [we'd consult] before we get there, figuring that that's more than a full [percentage point] drop in the federal funds rate. It may well come next week. I don't know for sure whether it will. It will depend on what our money supply figures show, so we don't know yet. And the significance of what rate we put in the... | 111 |
fomc | 1,980 | A show of hands? | 5 |
fomc | 1,980 | Yes, a show of hands on acceptability is what we're looking for at this point. Are the specifications clear? These do not appear in the directive, [except] the one for the federal funds range. On the others, we have the general language in the directive. We have a reserve target which we expect is almost certainly cons... | 172 |
fomc | 1,980 | It's 10-1/2 to 19 percent. | 12 |
fomc | 1,980 | We still have 19? | 6 |
fomc | 1,980 | We lowered that. | 4 |
fomc | 1,980 | No we didn't; it was only [lowered from] 20 to 19 percent. | 19 |
fomc | 1,980 | Well, we're making this tremendous 5 percentage point drop in interest rates, Larry! It's an enormous tolerance, which we really-- | 26 |
fomc | 1,980 | In other words, we're narrowing the range significantly, Mr. Chairman. | 14 |
fomc | 1,980 | We're back to where we started out in October. | 10 |
fomc | 1,980 | How many find that acceptable? One, two, three, four, five. I thought it was you who proposed it, Emmett? | 28 |
fomc | 1,980 | No. The funds rate range is what I proposed, but not the money growth target. | 18 |
fomc | 1,980 | You want a higher path? | 6 |
fomc | 1,980 | Yes. | 2 |
fomc | 1,980 | The [problem] is that [a higher path] is inconsistent with this funds rate. | 18 |
fomc | 1,980 | I want alternative B both with respect to the aggregates and the funds range. I have accepted the funds range specified here as consistent with the [higher] growth ranges [of alternative B]. | 37 |
fomc | 1,980 | We're not talking about this September/ December question. We're talking about the rest of May, June, and the early part of July. | 27 |
fomc | 1,980 | I know, but that relates to whether we're going to get back [to the target range] in September or in December. | 25 |
fomc | 1,980 | You're taking it off of alternative A rather than alternative B. | 12 |
fomc | 1,980 | Also, an implication is that if the numbers come in higher, we are not going to push the funds rate up. | 24 |
fomc | 1,980 | That is correct. Well, who has an alternative? | 11 |
fomc | 1,980 | My alternative would be to raise the point [targets] for M-1A, M-1B, and M2 to make them essentially the midpoints between alternative A and alternative B for the 2-month period and to establish an 8 percent lower end on the funds rate rather than 9 percent. That would be my suggestion. | 69 |
fomc | 1,980 | Quick consultation, say, at 9-1/2 percent? | 14 |
fomc | 1,980 | We would be reviewing it. The Chairman could call for a telephone conference as we got down into the lower end of the funds range, yes. I wouldn't want to be too specific because Murray might make us put it in the Policy Record. But the Chairman could have a call at 9-1/2 percent, as the rate was moving from 9-1/2 to 9... | 92 |
fomc | 1,980 | I don't think that represents a reasonable compromise. I am sympathetic with the Chairman's need to form some kind of consensus, given the difference in views. That tips it very heavily toward the view you expressed earlier, Chuck; it's not a reasonable compromise. | 50 |
fomc | 1,980 | Well, I'd compromise between alternative A and alternative B. I spoke in terms of alternative B. I would rather have a funds rate of 7 percent; I just specified a funds rate of 8 percent. I compromised compared with what I would otherwise have done. He asked if there were any suggestions and that was my suggestion. | 66 |
fomc | 1,980 | Another thing we can do to compromise further is to take your specifications of 7 to 7-1/2 percent and so on for the Ms and to make [the funds range] 8-1/2 to 14 percent. | 49 |
fomc | 1,980 | With consultation at 9-1/2. | 10 |
fomc | 1,980 | With consultation at 9-1/2. | 10 |
fomc | 1,980 | I could go that far. | 6 |
fomc | 1,980 | Your proposal, Nancy, says what about the aggregate targets? | 12 |
fomc | 1,980 | The aggregate targets would be 7 to 7-1/2 percent for M1, 7-1/2 to 8-- | 29 |
fomc | 1,980 | Everything is the same with an 8-1/2 percent [lower limit on the funds range] instead of 9. | 26 |
fomc | 1,980 | I couldn't accept that. | 5 |
fomc | 1,980 | I think that's good; I would go with that. | 11 |
fomc | 1,980 | I can accept Chuck's, but I couldn't accept 8-1/2 percent. It looks like fine-tuning. | 25 |
fomc | 1,980 | I'd go along with that in the interest of a consensus. | 12 |
fomc | 1,980 | Well, that's about as far as I can go. Let's try that one. | 16 |
fomc | 1,980 | Chuck's was 8 percent? | 7 |
fomc | 1,980 | We're voting on Paul's specifications [with a] drop in [the lower limit on] the funds rate to 8-1/2 percent? | 29 |
fomc | 1,980 | Should we put that one to a vote? | 9 |
fomc | 1,980 | This is with consultation as we approach 9-1/2 percent? | 15 |
fomc | 1,980 | We'll see whether Mr. Axilrod's judgment here is correct. | 14 |
fomc | 1,980 | Chairman Volcker Yes Vice Chairman Solomon Yes President Guffey Yes President Morris Yes Governor Partee No Governor Rice Yes President Roos No Governor Schultz Yes Governor Teeters Yes Governor Wallich Yes President Winn Yes It's 9 for, 2 against. | 51 |
fomc | 1,980 | Okay. | 2 |
fomc | 1,980 | We may have a long day ahead of us. If we don't use it all up with the Open Market Committee meeting, we'll use it up [discussing] monetary reform legislation. With that in mind, we will have lunch around the table in a convivial atmosphere. I am told that people worry about food and drinks being spilled on the rug. We... | 109 |
fomc | 1,980 | Either that or the Governors can't have [a rug]; it's one of the two. | 17 |
fomc | 1,980 | I'd like to welcome Governor Gramley officially to this august body in a new guise. He is completely unfamiliar with the table; I believe we literally have a new table since you were last here. So we welcome you to the table literally and figuratively. | 51 |
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