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fomc | 1,994 | With a proviso that as the economy has become more open, these normal channels that are put in the model become more important. | 26 |
fomc | 1,994 | Right. | 2 |
fomc | 1,994 | Certainly, import prices have a greater effect as the share of imports has grown over time. I think the share has come close to doubling over the last 25 years. But in addition to the effects of import prices on aggregate demand, there's really not much comparative evidence although we've really only begun to look care... | 67 |
fomc | 1,994 | President Syron, I want to turn this around slightly and emphasize that we see significant external impacts on the domestic inflation. Our econometric models do incorporate import prices through the aggregate demand channel. Weak economies abroad mean demand for our exports is weak. Other things equal, that tends to da... | 94 |
fomc | 1,994 | Well, that's right. You are capturing the external capacity utilization effect through those channels. | 17 |
fomc | 1,994 | Right. | 2 |
fomc | 1,994 | But I was just wondering whether independent of that--thank you. | 13 |
fomc | 1,994 | Governor Kelley. | 3 |
fomc | 1,994 | Mike, on the unemployment rate, the new and the old series, am I correct that our rule of thumb is that the new will run about 1/2 percentage point higher? | 37 |
fomc | 1,994 | Well, two things are going to happen with tomorrow's numbers. One is the introduction of the new survey of households. Looking at the sample that they used and comparing it to the official unemployment rate, the experience of the past year would suggest that it was almost .5 different. On top of that, these adjustments... | 193 |
fomc | 1,994 | President Jordan. | 3 |
fomc | 1,994 | I want to get some guidance on how to interpret the last table. You made assumptions about policy without any indication of the appropriateness of that policy. | 30 |
fomc | 1,994 | Except that we try to be sensitive to the objectives of the Committee, and so we are swayed. The reason that we put the interest rate increase in, as I noted, was that we thought that at a minimum you folks had expressed a view that the inflation trend should be pointed down; we just have it pointed barely down. | 67 |
fomc | 1,994 | Okay, well that's helpful. For '94 for instance compared to '93--from the very preliminary numbers we have for '93--you have nominal GDP increasing a little faster, actually a lot, but the CPI a little faster. Based on your chart on page 8, I understand your core rate of inflation for '94 would be slightly below this 3... | 310 |
fomc | 1,994 | That was the instruction that went out to the Committee members, and I thought I would not try to read the minds of the Committee. But let me just say-- | 33 |
fomc | 1,994 | But you said you did read the minds-- | 9 |
fomc | 1,994 | Well, one possibility I can imagine is that Committee members may feel that there will be developments in food or energy prices that may obscure an underlying trend and that the underlying trend is better than these numbers may suggest. But I don't know, and I didn't interrogate each person to find out exactly what his... | 78 |
fomc | 1,994 | Mr. Chairman and President Jordan, I'll be addressing this issue a little bit in my own briefing when we talk about whether the 1995 forecasts should be submitted to the Congress at this time. I think your point, President Jordan, is well taken in the sense that there would be a temptation to interpret the 1995 results... | 154 |
fomc | 1,994 | We didn't look at these numbers before we completed our forecast; in fact, we didn't have many of them before we completed the forecast. When I looked at them a day or so ago, I said our assumption that the Committee might consider a baseline with just a slight down tilt in the inflation rate relevant to their discussi... | 110 |
fomc | 1,994 | President Boehne. | 5 |
fomc | 1,994 | Normally in an economic expansion, developments in the real sector are mirrored at least to some extent in the financial side. And this report is relatively thin on the financial side. Yet, we tend to explain rising interest rates in an expansion by rising demand for credit, loan demand, and that sort of thing. Is the ... | 112 |
fomc | 1,994 | Well, our expectation is that as the financing gap of the nonfinancial corporate sector widens, as I indicated, there will be an increased need for credit by business firms and a considerable segment of that will be satisfied in the shorter-term markets, including bank loans. We have only a rather moderate increase in ... | 400 |
fomc | 1,994 | Governor LaWare. | 4 |
fomc | 1,994 | I answered my own question, so I withdraw. | 10 |
fomc | 1,994 | You gave the right answer? | 6 |
fomc | 1,994 | Yes! [Laughter] | 6 |
fomc | 1,994 | At least the one you wanted! | 7 |
fomc | 1,994 | President Keehn. | 4 |
fomc | 1,994 | With respect to the issue Don Kohn just raised: Is it a given that in the February Humphrey-Hawkins report we give the forecast for the next year and are we required to do that? | 41 |
fomc | 1,994 | No, we are not required to do so and I think that at some point we've got to decide whether in fact we will do that. | 28 |
fomc | 1,994 | I move that we do this year only unless we have to do 1995. | 17 |
fomc | 1,994 | Well, this was intended to be a topic for discussion. | 12 |
fomc | 1,994 | Maybe do last year! [Laughter] | 9 |
fomc | 1,994 | Don, when are we scheduled to discuss that question? | 11 |
fomc | 1,994 | With the long-term ranges. | 6 |
fomc | 1,994 | So we can decide after we do the long-term ranges. | 12 |
fomc | 1,994 | Well, I was going to include it as part of my briefing and it's up to you after that! | 21 |
fomc | 1,994 | The answer to your question is that we have not been required to do that. But the issue, as Don may have indicated, is largely an endeavor to respond to the Senate Banking Committee's question of whether the M2 targets are ceasing to be useful. If they are, the Banking Committee is looking for a vehicle which would ena... | 163 |
fomc | 1,994 | I think simply having the numbers may give some additional context to the discussion. | 15 |
fomc | 1,994 | Any further questions for the gentlemen? If not, would somebody like to start our roundtable? President Keehn. | 23 |
fomc | 1,994 | Mr. Chairman, with regard to the national economy, in terms of growth at least for this year our forecast is really very close to the staff forecast, especially for the main sectors involved, and any difference is really not worth talking about. Our overall CPI forecast is a little lower than the Board staff's; part of... | 810 |
fomc | 1,994 | President Parry. | 4 |
fomc | 1,994 | Mr. Chairman, while economic activity is healthy in most of the Twelfth District, weakness in California persists. Payroll employment, usually what we consider to be the most reliable short-term indicator of economic activity for a state, continues to decline. However, there is a growing body of evidence that suggests ... | 585 |
fomc | 1,994 | President McTeer. | 5 |
fomc | 1,994 | Little has changed in the Eleventh District economy since our last meeting. Growth remains in the range of moderate to strong and employment growth is strongest in the construction and durable manufacturing sectors. For context, job growth has been positive for the last 11 quarters and for 26 of the past 27 quarters. T... | 156 |
fomc | 1,994 | President Syron. | 4 |
fomc | 1,994 | Thank you, Mr. Chairman. Well, conditions are legitimately better in our District. The region's economy shows genuine improvement; I think it's cumulating. The only state that's an exception to that is Connecticut. Manufacturing--particularly in durables, products that are tied to autos and capital goods--looks pretty ... | 419 |
fomc | 1,994 | President Boehne. | 5 |
fomc | 1,994 | The tone in the District is positive, and I would say tentatively optimistic, going out for the balance of the year. Except for commercial real estate, most sectors and areas of the District are growing, and the growth appears to be self-feeding, although the District is still growing more slowly than the nation as a w... | 346 |
fomc | 1,994 | President Forrestal. | 4 |
fomc | 1,994 | Well, the moderate expansion that we've been experiencing appears to be continuing in our District. Looking at some of the sectors, retail sales have been quite good since Christmas with the exception of apparel and particularly women's apparel that required a lot of heavy discounting over the holidays. Retailers are g... | 559 |
fomc | 1,994 | President Hoenig. | 4 |
fomc | 1,994 | Mr. Chairman, our District continues to grow at a very steady pace on the whole. Within the District, though--as I mentioned I think in November and I'll say it again today--there is a little more of a boom-like atmosphere in the western and the northern portions. There is very strong housing and a shortage of labor in... | 349 |
fomc | 1,994 | Thank you. Governor Lindsey. | 6 |
fomc | 1,994 | Mr. Chairman, at the last meeting I talked a little about the differences between the rich and the poor, and I focused primarily on how taxes would affect the rich and how that might affect our forecast. I got some compliments, so at the risk of discouraging all praise, I thought I'd try it again and this time focus on... | 278 |
fomc | 1,994 | Netted out or what? | 6 |
fomc | 1,994 | Netted out--taking out the old rich. | 10 |
fomc | 1,994 | So, it's the old plus the young rich. | 10 |
fomc | 1,994 | It's the old plus the young rich. Actually, the way I did it was the rich plus the poor old. [Laughter] That's because getting the data was a bit easier that way. | 39 |
fomc | 1,994 | Could you call us the "no longer really young" instead of the old? | 16 |
fomc | 1,994 | John, you're not in this group! | 8 |
fomc | 1,994 | You've got to get politically correct! | 7 |
fomc | 1,994 | That's right. Well, we struggled with that labeling. I started with the "middle-aged middle class" and that didn't sound too good. So, we ended up calling it those likely to borrow of the non-rich, non-old. The next chart shows the debt service adjusted for Chart 1 which is the rise in the income share of the old and t... | 636 |
fomc | 1,994 | Excuse me, the Commerce Department does break that down into imputed interest and dividends--interest imputed at random from the cash flows, so they are using the same data. | 36 |
fomc | 1,994 | They are using the same data, yes. I had to get the income for the elderly too, so I had to go back and look at tax return data where people used an exemption for those over 65; that flagged the returns to be used in the tabulation. It turns out that only about 14 percent of total NIPA interest is actually received by ... | 486 |
fomc | 1,994 | President Broaddus. | 5 |
fomc | 1,994 | My report is going to be pretty bland after that, but developments since the December meeting have simply reinforced my view that the economy is moving ahead nationally at a good clip. Also, the recent national data show that the economy finished 1993 on a high note, and it seems clearly to have entered the current yea... | 510 |
fomc | 1,994 | Wait a second, what do you mean? [Laughter] MR. KOHN(?). He read the memo! | 25 |
fomc | 1,994 | Yes, I did read the memo. Just by way of explaining our projections and in particular our projection that inflation may be about 1/2 point lower than the Greenbook is expecting: We base that projection on an assumption that the Committee will move quite quickly to do whatever it needs to do to keep actual inflation und... | 78 |
fomc | 1,994 | That's pretty good! [Laughter] | 8 |
fomc | 1,994 | I ought to stop there. But just one final statement: I really think the System's anti-inflationary stance has done a great deal to increase our credibility in recent years, and in terms of the forecast I think it's quite likely that that will give us a better breakdown of nominal GDP between real growth and inflation i... | 69 |
fomc | 1,994 | President Stern. | 3 |
fomc | 1,994 | Thank you, Mr. Chairman. Business conditions in the District remain quite positive and the strength is widespread both by sectors of the economy and geographically. I'm certainly hearing fewer comments of concern about the future or about the fragility of the current expansion; that has diminished. One aspect of the ec... | 388 |
fomc | 1,994 | President Jordan. | 3 |
fomc | 1,994 | In spite of my own doubts about the matter, I consistently run into the expectation throughout our District that eventually it will thaw out! It's an the area of the country where severe winter weather seems to have absolutely no negative effect on people's mood and outlook. We also hear the stories of shortages of cer... | 740 |
fomc | 1,994 | President Melzer. | 4 |
fomc | 1,994 | Our outlook for real growth next year is somewhat more optimistic than that of the Greenbook, but in the case of inflation our outlook is considerably more pessimistic. Nearly all of the macroeconomic indicators have become increasingly favorable and point to a strong and sustainable expansion. But the down side of thi... | 688 |
fomc | 1,994 | Governor Kelley. | 3 |
fomc | 1,994 | Mr. Chairman, my sense of the course of events is in flux. As far as the strength of the economy goes, I had been thinking up through the time of the last meeting that we were indeed going to have a strong fourth quarter but that we would be looking at some substantial moderation after that. The fourth quarter now does... | 551 |
fomc | 1,994 | Governor LaWare. | 4 |
fomc | 1,994 | Well, it seems to me that the fundamentals of housing, autos, capacity utilization, new orders, inventory levels, and increased loan activity of banks are all pointing toward continued growth, even stronger growth than we previously expected. But the tax shock and the health care uncertainties are still unknown and unm... | 230 |
fomc | 1,994 | Governor Phillips. | 3 |
fomc | 1,994 | Thank you. The sustainability of the recovery certainly seems considerably more assured now. Leading the way are housing, autos, durables, clearly reflected in the IP index. People are spending and they're dissaving to do so. Inventories are lean so there probably will be no surprises on the supply side. Productivity i... | 627 |
fomc | 1,994 | Vice Chairman. | 3 |
fomc | 1,994 | Well, after some extended period of a very flat regional economy, economic activity in the Second District has actually been improving at a moderate pace for about the last three or four months. The December establishment survey showed modest job gains in New York State, New York City, and New Jersey. Over the October-... | 445 |
fomc | 1,994 | Thank you. We've completed the general discussion that we usually have on the first day of Humphrey-Hawkins meetings. As I mentioned earlier, we're going to reverse the schedule tomorrow to deal with the short-term monetary policy questions first and then go to the long-term ranges. The question I want to raise this ev... | 746 |
fomc | 1,994 | Mr. Chairman, I have a lot sympathy with what you suggest, and it strikes me that there's another information-gathering advantage-- | 27 |
fomc | 1,994 | Excuse me, could I just make one final comment before you go on? While I myself, as you know, have been strongly opposed in the past--and I have testified against announcing when we are making a move since it does reduce our flexibility--that issue is still on the table and it's a much broader issue. The issue of wheth... | 206 |
fomc | 1,994 | All I was saying is this: Just as you thought, appropriately, that it's worth seeing when we put out the transcripts what the reaction is going to be, we'll also get information if we follow this course from what the reaction is to it. There will be information in terms of market and Congressional reactions, and so for... | 244 |
fomc | 1,994 | Si. | 2 |
fomc | 1,994 | I'm not quite clear on the precedential side of this. Are you saying this would be an announcement that we have tightened without a discount rate change or with a discount rate change? | 36 |
fomc | 1,994 | The answer is no discount rate action. | 8 |
fomc | 1,994 | Okay. | 2 |
fomc | 1,994 | But the point here is that when we move the discount rate, we're hitting a "gong." What I'm saying is that the first time we move the funds rate after this extended period, we are hitting a "gong." | 44 |
fomc | 1,994 | That's right. | 3 |
fomc | 1,994 | And I think we ought to stand up and hit it. | 12 |
fomc | 1,994 | I agree with that. | 5 |
fomc | 1,994 | Other comments? Bob. | 5 |
fomc | 1,994 | I would very much support issuing a statement. I think it's very important that the statement exactly coincide with our taking action in the market and not be either before or after taking action. I also feel that we ought to have a discussion as quickly as is feasible about the desirability of similar statements in th... | 104 |
fomc | 1,994 | You don't mean in a special meeting but as part of the next meeting. | 15 |
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