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fomc | 1,994 | Vice Chairman. | 3 |
fomc | 1,994 | I very much support what Governor Lindsey just said. I think this is something that we absolutely must do because of the importance of this. As Jerry Jordan said, this would be the first time that we've increased--if we do so--interest rates since 1989. And, therefore, it is something that we should step forth and stat... | 176 |
fomc | 1,994 | I think simultaneous is risky, frankly. | 8 |
fomc | 1,994 | I agree with that. | 5 |
fomc | 1,994 | That's right. | 3 |
fomc | 1,994 | Why don't you put it out at 11:00 a.m. or something like that? Is 11:30 a.m. when you conduct your operations? | 33 |
fomc | 1,994 | Yes. | 2 |
fomc | 1,994 | If you did it by 11 a.m.-- | 10 |
fomc | 1,994 | It's very risky sometimes to try to time things down to the wire and hope that people pick up the press releases. | 23 |
fomc | 1,994 | I think it just takes a couple of minutes for the wires to get it on. | 17 |
fomc | 1,994 | Gary. | 2 |
fomc | 1,994 | I'm comfortable with what you are proposing. I happen to agree with those who think this will turn out to be precedential and from my perspective that's fine because I think we've been in an awkward situation where we have kind of acknowledged that people in the markets get the news and the signal immediately, but for ... | 154 |
fomc | 1,994 | You mean they are all related issues in other words. | 11 |
fomc | 1,994 | Yes. | 2 |
fomc | 1,994 | It's all one package. | 5 |
fomc | 1,994 | And I think we better get on with that discussion. | 11 |
fomc | 1,994 | Mr. Chairman, the former Mullins Subcommittee, whatever it is now, is to meet on this issue tomorrow after the FOMC meeting, so I don't think there's any reason why the Subcommittee can't put the finishing touches on whatever recommendations it is going to make in the very near term and get them out to the members. | 67 |
fomc | 1,994 | President Broaddus. | 5 |
fomc | 1,994 | Mr. Chairman, Ed Boehne really made my point. There are certainly risks of doing this and they have been well stated here. But there are risks of not doing this. If there were any confusion tomorrow going into the weekend or this thing gets played out in the New York Times on Saturday and Sunday or on CNN, I think we w... | 197 |
fomc | 1,994 | The purpose of accepting the Joint Economic Committee's invitation to testify before this meeting was precisely to move ahead of the curve on potential explanations in the event they were required of us. In a sense that statement was, as far as I can judge, the basis of what we've been doing. | 57 |
fomc | 1,994 | You can reference your JEC statement. | 8 |
fomc | 1,994 | Yes, I possibly could. President McTeer. | 11 |
fomc | 1,994 | Just for the record, Mr. Chairman, I agree with your suggestion and all of its details. I personally wouldn't mind seeing it become a precedent. I've argued before that quick release of the decision is much more desirable than verbatim minutes or transcripts, and I think that quick release of the decision might take of... | 87 |
fomc | 1,994 | Governor Kelley. | 3 |
fomc | 1,994 | Mr. Chairman, I think this is a very important question. It's had a very good airing, and I don't have anything to add to what has been said. I fully support your request and recommendation. | 41 |
fomc | 1,994 | Does anybody else want to raise an issue or question? Well, why don't we adjourn this evening. | 21 |
fomc | 1,994 | Mr. Chairman? | 4 |
fomc | 1,994 | Yes, Don. | 4 |
fomc | 1,994 | You asked me to remind you to remind the Committee of the highly confidential nature of the subjects being discussed, and the fact that you would take drastic measures if something were leaked. | 35 |
fomc | 1,994 | Nobody would want that! | 5 |
fomc | 1,994 | Let me just reiterate basically what Don said. If we end up tomorrow morning with anything in the newspapers, one way or the other, or any public indication of what it is we've discussed today in any respect, I think it will do very grave damage to this institution. And the Wall Street Journal the Post, and the Times a... | 127 |
fomc | 1,994 | Maybe you could just have some jam and hamburgers sent in; we could spend the night here. | 20 |
fomc | 1,994 | Jam and hamburgers? Hopefully not! | 8 |
fomc | 1,994 | Mike Prell has some information for us on the employment statistics. | 13 |
fomc | 1,994 | Earlier this morning I had a brief discussion with a senior official at the Bureau of Labor Statistics. The civilian unemployment rate for January was reported at 6.7 percent under the new survey. They have two econometric models that they are using to try to give people some guidance about how the month-to-month movem... | 917 |
fomc | 1,994 | How are financial markets interpreting that? | 7 |
fomc | 1,994 | Initially, the market moved up by almost a point at the long end--at the 30-year mark--as the headline news on the nonfarm number came across the wire. There has been some backing away from that. The market is still up; it was up about 3/8 to 1/2 when we came in here. It may be that market participants are trying to re... | 109 |
fomc | 1,994 | Let me just go get the latest report. [Secretary's note: Chairman Greenspan left the meeting very briefly at this point.] | 26 |
fomc | 1,994 | The other interesting aspect was that bill rates went down 3 or 4 basis points and the funds rate, which had opened at 3-1/8 to 3-3/16, went down to 3 to 3-1/16 and remained there. So in some sense at least the certainty of firming today was taken out by the employment numbers. Now, maybe as the bond market and everyon... | 96 |
fomc | 1,994 | The long end is now down 3/32. | 11 |
fomc | 1,994 | They got to the last page of the release! | 10 |
fomc | 1,994 | I was just handed Commissioner Abrahams's statement and she indicates here that "weather appears to have played a major role in the relatively small rise in payroll employment between December and January. The reference week for the survey was the week before the California earthquake and the East coast snow and ice st... | 245 |
fomc | 1,994 | I didn't quite catch what you said about the old survey; is that down 0.1 for the month of January? | 25 |
fomc | 1,994 | The econometric model that they have used would have predicted that. If I'm looking at the right place in the press release, it says: "Another tool that we are providing analysts is our model of what the January 1994 unemployment rate would have been under the old methods based on the historical relationships between e... | 81 |
fomc | 1,994 | Any further questions for Mike? Yes. | 8 |
fomc | 1,994 | I notice that the hours were way up, from 125.2 to 126.3. Is that the basis of your higher GDP forecast? | 30 |
fomc | 1,994 | Well, that's the key element in my judgment that would probably raise the forecast. But these numbers are all being affected by weather; evidently, we're going to have to sort through the data to get a more refined assessment. | 44 |
fomc | 1,994 | If you take those hours that were given and you assume that the average workweek didn't change, payroll employment goes up about 700,000. | 29 |
fomc | 1,994 | I just got a market update. The long end is now off 5/32, which puts it about 2/32 below what I had written down at 8:29 and 59 seconds a.m. [Laughter] But the funds rate is still at 3-1/16; bill rates are still down 4 basis points. We took a reading on the fed funds futures market at 8:55 a.m. and that suggested, at l... | 147 |
fomc | 1,994 | What about the dollar? | 5 |
fomc | 1,994 | It came off. Yesterday, it moved up against the mark and was 173ish to 174ish; it lost all of that first thing today and it's creeping back up to 173.63 on the latest reading that I have. | 48 |
fomc | 1,994 | Okay, any further questions for Mike? If not, let me call on Don Kohn. | 19 |
fomc | 1,994 | This is the short-run policy part of the meeting. [Statement--see Appendix.] | 17 |
fomc | 1,994 | Questions for Don? If not, let me get started. Much of what I would usually say I stated in my testimony on Monday before the Joint Economic Committee, and I won't belabor any of that. The one issue that I didn't raise, except in a very minor way, is what I consider to be potentially dangerous upside problems in the in... | 1,351 |
fomc | 1,994 | Thank you, Mr. Chairman. I believe very strongly that we should firm policy and that we should do so today and announce it today in the manner described in our late afternoon conversation yesterday. Let me give some of the reasons that drive me to this conclusion. We are very near potential GDP and all of our forecasts... | 543 |
fomc | 1,994 | President Melzer. | 4 |
fomc | 1,994 | Well, as I stated yesterday, Alan, the stance of monetary policy has in my view been very expansionary for the last two or three years. Accordingly, as I've also mentioned, the St. Louis Bank expects that the CPI will move up sharply in 1994 and will move even higher in 1995. Indeed, as you mentioned, there may be some... | 317 |
fomc | 1,994 | President Jordan. | 3 |
fomc | 1,994 | For some time, just viewing things from my District, I have started to get the feeling that it's not a case of worrying about head winds but rather of building tail winds. And after listening to the discussion yesterday, it sounds to me as if that's true to some extent around most of the country now. For any of you who... | 354 |
fomc | 1,994 | Let me raise a question. I thought about 50 basis points, or I thought about it in the sense of trying to move the rate to where we want to put it and then sticking with it. But I think it may be very helpful to have anticipations in the market now that we are going to move rates higher because it will subdue speculati... | 346 |
fomc | 1,994 | Would your preference be for 25 basis points and symmetric language or 25 coupled with asymmetric? | 19 |
fomc | 1,994 | That's a good question. At this stage I would tend to stay with symmetric if for no other reason than whatever it is we do the first time out, I think we send a very important message. If the economy continues to run ahead of our expectations, I would for the next move go asymmetric. | 60 |
fomc | 1,994 | Well, just to follow up: My own preference is always going to be for symmetry, and what I would like to see done would be to do 25 now but with an understanding that there may be a conference call if conditions seem to warrant another 25 even before the March meeting. | 58 |
fomc | 1,994 | Well, I don't think we have to have an understanding. That's an ongoing issue and I wouldn't want to imply that that's not always the case because I think it is. President Boehne. | 39 |
fomc | 1,994 | As far as the economy goes, this is as good as it gets in terms of convincing evidence to move. There always are uncertainties; there always are reasons why we shouldn't make a change. But what I see is a self-feeding expansion and I think capacity and price pressures are not all that far away. So, as far as the econom... | 430 |
fomc | 1,994 | President Broaddus. | 5 |
fomc | 1,994 | Mr. Chairman, I certainly think that the time has come to move and that we need to take action today. If we don't move, we would put our credibility seriously at risk because there's no question really that we need to move. If we don't, I think we will fall way behind the curve. In terms of the amount, my preference wo... | 336 |
fomc | 1,994 | President Forrestal. | 4 |
fomc | 1,994 | Mr. Chairman, this decision is not altogether clear-cut in my mind. As a matter of fact, I view it as a difficult decision. I would just like to interject the argument for waiting a little, and that argument would revolve around the uncertainty in the economy. We certainly had a demand surge in the fourth quarter and i... | 520 |
fomc | 1,994 | And which price index are we using, that sort of thing. | 13 |
fomc | 1,994 | Yes. | 2 |
fomc | 1,994 | And over what time period. | 6 |
fomc | 1,994 | I throw that out as a suggestion for the Committee to think about. | 14 |
fomc | 1,994 | Governor Lindsey. | 3 |
fomc | 1,994 | I agree it's certainly the time to move. I have three thoughts on why I would prefer a move of 1/2 point over 1/4 point. First, the staff in yesterday's presentation said that to maintain not price stability but constant inflation we have to raise interest rates 150 basis points by mid-1995. We have to make a choice as... | 106 |
fomc | 1,994 | Suppose they are wrong? | 6 |
fomc | 1,994 | Well, if anything, I think the risks are that we are going to have do more than 150 basis points to lower the level of inflation. I think the bias of the Committee is that if possible we want to bring inflation down a little more. Furthermore, the staff noted today that GDP momentum seems stronger than they thought whe... | 433 |
fomc | 1,994 | Let me just interject. | 6 |
fomc | 1,994 | You want to correct my sense of history? | 9 |
fomc | 1,994 | The history was that the Fed took the 10 percent surcharge as fiscal deflation and didn't act. The Fed was wrong and had to act more rapidly in order to offset that, so I think that was not a period when the Fed excelled in policymaking. | 53 |
fomc | 1,994 | But the 10 percent surcharge wasn't enacted until 1968 and didn't take full effect until 1969. | 22 |
fomc | 1,994 | Yes, but there was the expectation that there would be fiscal drag, and I think the Fed responded to that. That's not a major issue; I don't want to prolong the discussion but I happened to be reading about that episode recently. | 47 |
fomc | 1,994 | Okay. In any case, if we have to do 150 basis points or more, I think the greatest "bang for the buck," with minimum harm to long-term growth, would be to move 50 basis points today. | 46 |
fomc | 1,994 | President Hoenig. | 4 |
fomc | 1,994 | Mr. Chairman, I think yesterday's discussion and this morning's indicate that we really need to take action now. As for the amount, there is an economic case for doing 50 basis points now and I think it would in the longer term give us a more stable environment. Bill McDonough's arguments are valid to some extent in te... | 100 |
fomc | 1,994 | President Stern. | 3 |
fomc | 1,994 | I agree with all the comments that have been made about it being the appropriate time to move, and I won't go through the rationale for that. On the question of magnitude, I have a mild preference for a 50 basis point move basically on the grounds that I believe short-term interest rates have to move pro-cyclically. A ... | 175 |
fomc | 1,994 | President Parry. | 4 |
fomc | 1,994 | Mr. Chairman, I too would favor tightening at this point for the reasons that have been mentioned. I might note that I found your discussion of inventories quite interesting. Yesterday, I characterized our forecast as being very similar to that of the Greenbook. One difference is that we have somewhat greater strength ... | 177 |
fomc | 1,994 | President Syron. | 4 |
fomc | 1,994 | To start out, I guess I disagree with Bob Parry. I came into this meeting thinking that we should do something. As I read expectations and where things are, I would have thought that 25 basis points would not be seen by the market as something that was lacking in courage or testosterone on our part. I want to make some... | 88 |
fomc | 1,994 | Sure. | 2 |
fomc | 1,994 | And the question is, Joan: What do you think the expectations in the market will be if we are to do something? What do you think the market reaction would be to 25 basis points as compared to 50 if either were announced about an hour from now? | 54 |
fomc | 1,994 | When the market was anticipating the move, I think most of the expectations were for 25 basis points. Some of that got built into the rate structure yesterday; I think by the time the day was over about 80 percent reflected that a 1/4 point move might occur today. This morning's numbers on the January employment situat... | 137 |
fomc | 1,994 | Well, let me just continue. I think policy has been stimulative but I don't think it has been inappropriately stimulative. I don't want to argue about a month or five or six weeks one way or the other, but we went through a period in which we needed to do something. What we all want to do very clearly is to maximize lo... | 451 |
fomc | 1,994 | Well, I've been around a long time watching markets behave and I will tell you that if we do 50 basis points today, we have a very high probability of cracking these markets. I think that would be a very unwise procedure. It is far easier for us to start the process with a smaller move. And, as Dick Syron says, there's... | 165 |
fomc | 1,994 | That's right. | 3 |
fomc | 1,994 | This is a very big move, not because of the magnitude but because of the announcement effect, as Dick Syron points out. I would feel very uncomfortable if we tried to do more at this stage. I think it's the wrong pattern and I must say it would make me really uncomfortable. | 58 |
fomc | 1,994 | Could I make a comment? | 6 |
fomc | 1,994 | Certainly. | 2 |
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