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fomc | 1,977 | No, no, wait, wait--we have been through all of that. For a time, we would fix on a range and then we would say, oh no, let the effective range be smaller. That got us into difficulties. The range that we decide on, we've found through experience, is the range that ought to be available to the Desk to use in full. Now,... | 170 |
fomc | 1,977 | If we got to the extremities on the aggregates. But we would have zones of indifference-- | 20 |
fomc | 1,977 | Oh yes, oh yes. | 6 |
fomc | 1,977 | All right, then I'll retract: 4-1/4 to 5-1/4 straight--that will be my vote. | 28 |
fomc | 1,977 | It'll take three weeks for the Manager to understand where he is anyway. | 15 |
fomc | 1,977 | Did you say "to the extremities" or "through the extremities"? | 16 |
fomc | 1,977 | I said "to the extremities." | 8 |
fomc | 1,977 | Well, "to" or "through"-- | 9 |
fomc | 1,977 | If you were at the extremes on M1 and M2. One other point, Mr. Chairman. I sort of feel, as I think President Volcker inferred, that we're probably at the bottom, and rates are going to be moving up. We've been wrong about that before, and we could be wrong about it again, and I don't think we ought to make the judgmen... | 99 |
fomc | 1,977 | We'll move on now. Mr. Kimbrel now, please. | 14 |
fomc | 1,977 | Mr. Chairman, I believe Governor Partee has phrased my honest feeling about this. If had my druthers, I [would] really prefer to see the funds rate with a somewhat larger spread. I recognize the problem that we face and am prepared to accept this narrower 4-1/2 to 5, but that doesn't mean I am overwhelmingly happy abou... | 149 |
fomc | 1,977 | Thank you, Mr. Kimbrel. Who'd like to speak now. Mr. Mayo, then Mr. Black. | 25 |
fomc | 1,977 | Well, Mr. Chairman, I [do not have] a very decided preference, but I do have a preference for Chuck's prescription on a 4-1/4 to 5-1/4. I think a 1 point spread--I find it a little more comfortable than a 1/2 point. I think we are zeroing in a little too closely on the federal funds constraints if we make it only a 1/2... | 256 |
fomc | 1,977 | Thank you, Mr. Mayo. Mr. Black, please. | 13 |
fomc | 1,977 | Mr. Chairman, our projections for January, like those of the Board staff, suggest that M1, anyway, will come in a good deal stronger than we thought a month ago. But I think we've got particularly difficult problems this time of year, and we have been studying this pattern that develops around the Christmas season--beg... | 301 |
fomc | 1,977 | Thank you, Mr. Black. Mr. Balles, please. | 14 |
fomc | 1,977 | Well, a number of those who have already spoken have, in effect, given my speech. In view of the sustained overshoots we had in M2--given my own strange sort of view that M2 is probably a better predictor of what's going to happen now than M1--I think it's time to lean against that overshoot a bit, and hence I would li... | 179 |
fomc | 1,977 | Thank you, Mr. Balles. Who would like to speak now, please. Mr. Wallich. | 22 |
fomc | 1,977 | I think the matter that should dominate our thinking is the prospective bulge, and that's been very troublesome in the past. I therefore feel that Governor Partee has a very good point in suggesting we accumulate a little reserve. That leads me to alternative B, shaded downward by 1/2 point on each end. Once the bulge ... | 145 |
fomc | 1,977 | Thank you, Mr. Wallich. Mr. Lilly, please. | 14 |
fomc | 1,977 | I have no problem with alternative B as far as M1 and M2 are concerned. If I'm right about the economy having bottomed out, starting out it may well be that we will need a 5-1/4 rate. If I'm wrong, it may well be that we need a 4-1/4 rate. So I would vote 4-1/4 to 5-1/4. | 86 |
fomc | 1,977 | Thank you, Mr. Lilly. Who would like to speak next, please. Governor Jackson now. | 20 |
fomc | 1,977 | I would be inclined to support the 3 to 7 M1 and 7 to 11 M2 ranges. It strikes me that, within the current environment of the money market, I would be more inclined to the 4-1/4 to 5 federal funds rate [range]. While I share the concern about the prospective bulge, I don't share the opinion that near-term prospects of ... | 105 |
fomc | 1,977 | Thank you, Mr. Jackson. Who's ready to speak now. Mr. Eastburn. | 19 |
fomc | 1,977 | If I understand what is referred to by "the bulge," then I guess I have some difficulties with it because it seems to me that, if it comes from a rebate, it's just a temporary cessation in the flow of funds [to which] we shouldn't pay all that much attention. So far as rates are concerned, it seems to me that rates are... | 123 |
fomc | 1,977 | Thank you, Mr. Eastburn. Mr. Gardner, please. | 14 |
fomc | 1,977 | I think we should shave the 1/2 point off of the aggregates. I think the range in the federal funds rate is important in view of the sensitivity in this current situation. I don't want to see the zone of indifference widened without some recognition. The size of the range is the inverse ratio of the amount of time Stev... | 167 |
fomc | 1,977 | Thank you, Mr. Gardner. Who would like to speak now. | 14 |
fomc | 1,977 | Mr. Chairman. | 4 |
fomc | 1,977 | Yes, Mr. Baughman. | 8 |
fomc | 1,977 | I would find your recommendation acceptable, but with a preference for the 4-1/4 to 5-1/4 federal funds rate. And I guess I didn't hear you mention a preference on the directive, but my preference would be for the aggregates directive. I was a little confused with Governor Partee's saving up theory, but the ensuing dis... | 112 |
fomc | 1,977 | And not have to adjust it so much when we have it at hand. | 15 |
fomc | 1,977 | That's about the only context in which I could hang it together. | 13 |
fomc | 1,977 | All right, thank you Mr. Baughman. Mr. Winn, may we hear from you. | 21 |
fomc | 1,977 | Yes. I think the alternative C ranges for the Ms, and probably 4-1/4 to 5 on the rate spread. I'm not sure that's logically consistent. | 35 |
fomc | 1,977 | You say you're not sure. | 6 |
fomc | 1,977 | That it's logically consistent. I'm not sure of that. | 11 |
fomc | 1,977 | It's as logical as anything around this table. | 9 |
fomc | 1,977 | That's a new consideration! | 5 |
fomc | 1,977 | Yes, Mr. Guffey. | 8 |
fomc | 1,977 | If I understand Mr. Winn correctly, I think I would adopt the same thing, that is, alternative C ranges on the aggregates with the fed funds 4-1/2 or 4-1/4 to 5--what is expressed as the range for B. It isn't clear to me, however, what would happen if we adopt a 4-1/2 to 5 range for the federal funds. Does that mean th... | 109 |
fomc | 1,977 | That would be the judgment the Committee would have to reach. Normally, we move gradually; there have been times when the Committee wanted to move rather rapidly. Anyone else want to speak? Mr. Morris, yes, please. | 45 |
fomc | 1,977 | Mr. Chairman, I think that the differences we're talking about are quite narrow, but I think I would prefer to keep the present midpoint and use a 4-1/4 to 5 range. | 41 |
fomc | 1,977 | All right, thank you, Mr. Morris. Anyone else? If not, there is a narrow preference for the ranges of 3 to 7 and 7 to 11 for M1 and M2 respectively. There's more diversity with regard to the federal funds rate, but the divergences are quite small. I think a reasonable balancing of the opinions expressed would be a rang... | 275 |
fomc | 1,977 | Could I have Mr. Axilrod's judgment on the reaction in the marketplace toward a perceived slight firming in the federal funds rate given the recent emotional reaction to prospects of interest rates. | 38 |
fomc | 1,977 | I think you may also want to get Mr. Sternlight's judgment, but mine 250 miles further south would be that-- | 26 |
fomc | 1,977 | That might be the reason I asked you--he's too close to it. | 16 |
fomc | 1,977 | --would be that there would be a further reaction. I would be hard-pressed to quantify it, but if I had to guess, I would put 10 to 15 basis points on the bill rate, maybe 10 to 20 basis points more on intermediate Treasury issues, and further rises from the corporate bond rate. I might add that I think the intensity o... | 143 |
fomc | 1,977 | Which would be the bigger reaction? | 7 |
fomc | 1,977 | The latter. | 3 |
fomc | 1,977 | All right, let's turn to Mr. Sternlight, and then we have Mr. Holmes. | 19 |
fomc | 1,977 | Well, I think I agree that there would be a reaction, proceeding to a 4-3/4 [rate]. | 25 |
fomc | 1,977 | Aren't you just about there now? | 9 |
fomc | 1,977 | It's very close, Mr. Chairman. We are only talking about 1/8, but it's something that-- | 23 |
fomc | 1,977 | Well, wait a minute now. Haven't you been closer than that recently? Weren't you closer than that yesterday? | 25 |
fomc | 1,977 | Well, we're still aiming at 4-5/8. | 13 |
fomc | 1,977 | I didn't ask you what you were aiming at, I asked you where you were. | 17 |
fomc | 1,977 | Well, yesterday's effective rate was 4.80, but I think the market still perceives us as aiming for 4-5/8. I think there's a difference--they've seen us resisting-- | 43 |
fomc | 1,977 | Yesterday you were [at] 4.80, and if you move within a range of 4-5/8 to 4-3/4, the market might be relieved, instead of exploding with 10 to 12 basis points. You know, I'm not a market man, but I do follow figures. I don't know-- | 70 |
fomc | 1,977 | Would you agree on the size of the adjustment, Peter--10 to 20 basis points? | 19 |
fomc | 1,977 | It depends on how the market saw us implementing it; I think that might be reasonable. I think, if we moved aggressively to achieve 4-3/4, that it could be more of a reaction than that. Or if we were just sort of able to slide into it because, as the Chairman said, we were already there yesterday and funds just kind of... | 149 |
fomc | 1,977 | All right. Mr. Holmes. | 7 |
fomc | 1,977 | I think I would stress Mr. Sternlight's last point, that it's how you get there that's really important. If we had to push aggressively in the market to push the funds rate up, I think the market would react one way. If it rather drifted into it and then we tended to keep it there, I think the market would have less [o... | 97 |
fomc | 1,977 | Well, I don't think there is any sentiment within the Committee that you do anything aggressive. You know what we have been talking about are such minute differences, and therefore, aggressive behavior is hardly being contemplated by the Committee. | 44 |
fomc | 1,977 | I don't mean aggressive in a real term but I mean in a market-perceived term, and in that case you don't have to be very aggressive to seem aggressive. This is a very subtle difference. | 40 |
fomc | 1,977 | Now, I can't speak for the Committee, but let me still try, and the Committee will tell me if I'm off track. Suppose that the instruction to you were not to be aggressive in any of the senses of the word that you have distinguished in our behalf. | 53 |
fomc | 1,977 | We would understand that, Mr. Chairman. | 9 |
fomc | 1,977 | Well, would you, in that case, cause trouble? | 12 |
fomc | 1,977 | No, I think we would have to watch what happened. If we got to 4-3/4 and found it was causing trouble, my inclination would be to back away, to come below--quickly. | 44 |
fomc | 1,977 | You would plan on moving to 4-3/4 with deliberate speed is the course you-- | 20 |
fomc | 1,977 | Deliberate speed, but recognizing there is a Treasury financing coming up. If we are already closely there, we don't have all that much time. | 30 |
fomc | 1,977 | And they were at 4.80 yesterday. | 10 |
fomc | 1,977 | I don't know where we are. We were at 4-3/4 earlier today. | 19 |
fomc | 1,977 | That effectively would be sort of stopping the downward drift and imperceptibly tightening up. | 17 |
fomc | 1,977 | One would hope that we would be that skillful. | 11 |
fomc | 1,977 | Gentlemen, let me try--I have to try something else. I have heard no dissent from my suggestion on the M1 and M2. Suppose we have a 4-1/4 to 5 percent federal funds rate and that the midpoint not be regarded as 4-5/8 and it not be regarded as 4-3/4 but that it be regarded as the range between 4-5/8 and 4-3/4. | 97 |
fomc | 1,977 | That's a good 16th, Mr. Chairman. | 11 |
fomc | 1,977 | I suggested that last time, and you said I was being too tough on the Desk. | 18 |
fomc | 1,977 | Yes, but I'm having more trouble today. | 9 |
fomc | 1,977 | I think that's highly desirable, also, in the interest of softening up the precision of these things a little. | 23 |
fomc | 1,977 | Yes, I think that's a good technique. | 9 |
fomc | 1,977 | Mr. Chairman, I don't want to put too much sand into this cogwheel, [but] I must admit you're narrowing the degree of available range within which the Desk moves from a-- | 38 |
fomc | 1,977 | No, no, this is a definition of the midpoint. | 12 |
fomc | 1,977 | Well, I understand that-- | 6 |
fomc | 1,977 | Not a definition of the federal funds rate range. | 10 |
fomc | 1,977 | Well, but you've got some range now. | 9 |
fomc | 1,977 | I've broadened the definition of the midpoint. | 9 |
fomc | 1,977 | Well, against the 4-1/4 to 5-1/4 you have narrowed it. | 22 |
fomc | 1,977 | Then it's the whole range. | 6 |
fomc | 1,977 | The midpoint is no longer a point; the midpoint has itself become a subrange. If my motion is unsatisfactory, we will entertain any other and put it to a vote. | 36 |
fomc | 1,977 | Try 4-5/8? | 8 |
fomc | 1,977 | That is to say, conventional procedure--4-1/4 to 5 conventional procedures. All right is there a-- | 25 |
fomc | 1,977 | Are we giving preferences? | 5 |
fomc | 1,977 | What's that? | 3 |
fomc | 1,977 | Preferences? 4-5/8 as the midpoint, or 4-5/8 to 4-3/4 as the midpoint. | 30 |
fomc | 1,977 | 4-1/4 to 5 is the range. All right, but the midpoint could be 4-5/8, or an asymmetrically determined midpoint of 4-3/4. Those members of the Committee who prefer 4-5/8, would they kindly raise their hands. | 63 |
fomc | 1,977 | Four, Mr. Chairman. | 6 |
fomc | 1,977 | Those who prefer 4-3/4. | 10 |
fomc | 1,977 | Five. | 2 |
fomc | 1,977 | Well, we can't--we weren't voting. The wise men haven't voted, I think. Gentlemen, I will put this to a vote now, quite arbitrarily: 3 to 7 for M1, 7 to 11 for M2, 4-1/4 to 5 percent for the federal funds rate range, and the midpoint to be interpreted by the Desk in the light of our very illuminating discussion and the... | 92 |
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