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fomc | 1,994 | Mr. Chairman, I think we should announce it on the merits of the case. The time is here to do that. As far as today is concerned, I would be uncomfortable holding this decision overnight and letting it be announced in the traditional way of Desk action tomorrow. I think that would be a mistake. I am in favor of letting... | 90 |
fomc | 1,994 | President Stern. | 3 |
fomc | 1,994 | I agree with what Governor Kelley just said. | 9 |
fomc | 1,994 | President Hoenig. | 4 |
fomc | 1,994 | I support the subcommittee's recommendation. I think we have in a sense committed ourselves to this and I think Bill McDonough's point is well taken. We should get decisions out to the market and the public as soon as we are making them, so I support announcing. | 56 |
fomc | 1,994 | President Parry. | 4 |
fomc | 1,994 | I would favor the announcement. | 6 |
fomc | 1,994 | President Boehne. | 5 |
fomc | 1,994 | Well, this was a very wise subcommittee and I want to concur with its recommendations. [Laughter] | 22 |
fomc | 1,994 | Who is the chairman of that subcommittee? | 9 |
fomc | 1,994 | The chairman departed the scene! | 6 |
fomc | 1,994 | Is that everybody? Jerry, you said yes to announcing. Is that right? | 16 |
fomc | 1,994 | Yes. | 2 |
fomc | 1,994 | Governor Phillips. | 3 |
fomc | 1,994 | Can I ask: Is there an auction today? Are we talking about announcing today? | 17 |
fomc | 1,994 | There was; it's over. | 6 |
fomc | 1,994 | It's over. | 3 |
fomc | 1,994 | The auction is over. Okay, I'd announce. | 10 |
fomc | 1,994 | That's part of the timing issue--to get it out after the auctions are over. | 17 |
fomc | 1,994 | Ms. Minehan. | 5 |
fomc | 1,994 | I must say I am impressed by President Forrestal's comments. I would like to see the disclosure decisions as a package and I would not like to see us committed to announcing every time. But in general I think announcement is not a bad thing. | 50 |
fomc | 1,994 | Well, let me make the following request. I don't deny that it will appear precedential. In fact, I think it's naive to believe that if we announce today that it's not going to come out that way. We do have a marginal value in my doing it and then making it official at the time we do everything else. It's not that it's ... | 105 |
fomc | 1,994 | I don't have a strong objection, Alan. How would Joe Coyne respond to inquiries of "What does this mean?" There are bound to be some requests; what's the answer? | 36 |
fomc | 1,994 | He would basically say the Committee itself has not come to a final conclusion. | 15 |
fomc | 1,994 | It is still considering disclosure issues? | 7 |
fomc | 1,994 | This will be part of a broader package. Okay our next meeting is-- | 15 |
fomc | 1,994 | May 17th. | 5 |
fomc | 1,994 | May the 17th; this really is a long intermeeting period. | 15 |
fomc | 1,994 | Would somebody like to open the meeting by making a motion to approve the minutes? | 16 |
fomc | 1,994 | So move. | 3 |
fomc | 1,994 | Is there a second? | 5 |
fomc | 1,994 | Second. | 2 |
fomc | 1,994 | Without objection. I'll call on Peter Fisher for a report on foreign currency operations. Peter. | 18 |
fomc | 1,994 | Thank you. [Statement--see Appendix] | 9 |
fomc | 1,994 | Questions for Peter? | 4 |
fomc | 1,994 | Peter, you mentioned communication. Most of the research I've seen suggests that intervention like this, if it has an effect, it's mainly by way of communicating future likely policy actions. With that in mind, what do you think the prospects for the dollar would be if we did not follow through at this point with prett... | 66 |
fomc | 1,994 | The dollar would trade off. | 6 |
fomc | 1,994 | Significant downside risk or-- | 6 |
fomc | 1,994 | It's very hard to put a number on that. Let me start by saying that if the Committee does something in the range of what the market is expecting, I'm not sure the dollar will move up very abruptly. I think it will tend to pip up and pip down a little bit as has happened with previous actions of the Committee. I think i... | 111 |
fomc | 1,994 | This is really a follow-up question. A coordinated intervention like the one in which we participated on May 4 carries with it the message that there was communication taking place about fundamentals. Everybody knows there was intervention with coordination. Can you share with us what the nature of that communication w... | 77 |
fomc | 1,994 | I think that the morning of May 4 began with President Tietmeyer's release of his statement that they did not have an interest in seeing the mark overvalued against the dollar. One consultation in which I was engaged was a discussion of the nature of the dollar's reaction to the mark and that it seemed to move awfully ... | 203 |
fomc | 1,994 | President Jordan, just to amplify on what Peter said, since you referred to the finance ministries, the principal consultations initially were between us and the Treasury Department, and between the Chairman and President Tietmeyer on the day before his statement. These consultations were followed up by some discussion... | 98 |
fomc | 1,994 | I assume that market participants don't know the magnitude of the intervention. I don't know how well they can guess at those things, but when I saw the amount that the Germans did and a statement by Mr. Issing, I read that as a lack of enthusiasm for the business. | 56 |
fomc | 1,994 | Well, I guess that's right, but I can tell you that the Bundesbank Directorate did discuss this operation. Whether Mr. Issing was present at that discussion I do not know. But both Mr. Tietmeyer's statement--the excerpts from his speech, which were deliberately released early--and the size of the Bundesbank operation w... | 75 |
fomc | 1,994 | Let me just add that I've had a number of conversations with Mr. Tietmeyer. | 19 |
fomc | 1,994 | There was a press commentary after the May 4 action--I don't remember its precise contents--but people in the Treasury and in the Administration more generally supposedly viewed the action as an alternative to domestic monetary policy actions. | 43 |
fomc | 1,994 | The issue never came up, at least not in my conversations. Governor Lindsey. | 16 |
fomc | 1,994 | Peter, given what the Chairman just said, which I agree with, and given what you said--that even if our policy moves along the lines of market expectations, there's not going to be upward movement in the dollar--that opens the question as to what is next and means that we may have another run on the dollar. How long do... | 115 |
fomc | 1,994 | With regard to the risk for the dollar going forward, I would again focus on the dollar/yen exchange rate. I think the operation and the action of the Bundesbank last week and whatever the Committee does in the realm of the expected, if I can put it that way, will tend to stabilize the dollar/mark rate. I don't see any... | 185 |
fomc | 1,994 | Does the potential reversion, which hopefully we won't have, that you mentioned involve foreign policy issues or does that include monetary policy statements? | 27 |
fomc | 1,994 | I'm not quite reading you. The monetary policy by the Administration or-- | 14 |
fomc | 1,994 | Yes, in other words dollar bashing being foreign exchange statements, how about Fed bashing being monetary policy statements. If there were a recurrence of the former, would that be harmful? | 37 |
fomc | 1,994 | That will tend to disturb the foreign exchange market. I think one of the very helpful official statements on May 4 was that by Mr. Altman to the effect that he had no argument with the Fed over interest rates. That really came on the heels of the Tietmeyer comment; that was a very useful setting for the operation. So ... | 99 |
fomc | 1,994 | How about Congressional statements? | 5 |
fomc | 1,994 | I think they are more expected by the foreign exchange market than Administration statements; they may be in the same vein but I don't think they have the same effect. | 32 |
fomc | 1,994 | President Forrestal. | 4 |
fomc | 1,994 | Peter, I have a variation on Al Broaddus's question. As you know, the Europeans have been somewhat concerned about the effect of our actions on their long-term rates. Does the market anticipate or do you yourself think that if we were to take an action today that it would have an upward effect on European rates or have... | 77 |
fomc | 1,994 | Well, if the history of the last three or four months is my guide, I'd have to say I would expect an impact on their long end. It's hard to imagine there won't be some such impact. I think, though, that we have seen more decoupling in this period--between the last meeting and now--than we saw in previous periods. So, i... | 153 |
fomc | 1,994 | Okay, any further questions? If not, would somebody like to move to ratify the actions of the Foreign Desk since the last meeting? | 28 |
fomc | 1,994 | So move. | 3 |
fomc | 1,994 | Second. | 2 |
fomc | 1,994 | Without objection. Joan Lovett. | 7 |
fomc | 1,994 | Thank you, Mr. Chairman. [Statement--see Appendix.] | 13 |
fomc | 1,994 | Questions for Joan? Jerry. | 6 |
fomc | 1,994 | Before February when we started to announce our actions, it was standard practice in the daily program to protest a federal funds rate move away from the intended rate, maybe sometimes going against what you saw as the reserve needs of the current maintenance period. Since February we've announced our decisions three t... | 154 |
fomc | 1,994 | Well, I think that what really is at stake is that while we have announced the changes that we have made, the market still sees itself as always looking for when we're going to make a change in the future. On occasions when they think we will or we should, they move the funds rate up immediately in the morning well bef... | 224 |
fomc | 1,994 | Are there still people out there who think we might change the intervention level on the funds rate without an announcement? | 22 |
fomc | 1,994 | Yes, there are some people who still think that's a possibility; it hasn't been ruled out because we have mentioned that these announcements have not necessarily been for all time. I think the market tends to set up for itself a series of time points. It looks for announcements on the discount rate now within a certain... | 192 |
fomc | 1,994 | If they've come to believe that all increases in the funds rate will be accompanied by an announcement, then the absence of an announcement would seem to lessen the need to protest. A protest action would occur if you saw a need to drain reserves but you felt you had to add reserves because the funds rate was too high.... | 114 |
fomc | 1,994 | Well, I guess it's really their anticipatory moves that we're talking about; it's not the actual Fed moves; it's the market anticipating the Fed moves before they occur. | 33 |
fomc | 1,994 | Well, what's the difference between our failure to issue a press release and a protest action by the Desk? | 21 |
fomc | 1,994 | Perhaps with the passage of time, as people become accustomed to our new disclosure practices, those anticipatory moves will not require our protest actions. But we're always going to have anticipatory moves; I think that's a given. How the market would view our absence from protesting I think would require more experi... | 119 |
fomc | 1,994 | The day before the March FOMC meeting nobody expected us to change policy that day or to announce a change that day but funds were still high. | 30 |
fomc | 1,994 | Right. | 2 |
fomc | 1,994 | And if we had not gone in, that would have looked as if the decision somehow had been made ahead of the meeting. | 25 |
fomc | 1,994 | Or that we were trying to get the market ready for it--to pave the way for a decision. I think that there just has not been enough experience with the announcements for people to feel comfortable in terms of what the timing of those announcements is and so forth. | 53 |
fomc | 1,994 | I would hope that over time one of the benefits of announcing would be the leeway to allow the funds rate to move on a daily basis over a little wider range without worrying about an incorrect perception of current policy. | 43 |
fomc | 1,994 | That's one of the advantages of announcing. | 8 |
fomc | 1,994 | Yes. | 2 |
fomc | 1,994 | Joan, just a quick question. What is your estimate of the Treasury balance shortfall? | 19 |
fomc | 1,994 | Well, relative to our expectations on the April tax collection themselves, we fell short by $12 billion. And if we take April and May combined there was a big catchup in early May. | 39 |
fomc | 1,994 | Yes. | 2 |
fomc | 1,994 | They only fell short by about $9 billion. We had forecast an increase in the April tax take of something in the neighborhood of 25 percent over the level a year ago and it appears to be coming in between 5 and 10 percent above. Everyone seems to have had those same kinds of overestimates, so people are still trying to ... | 105 |
fomc | 1,994 | If there are no further questions, would somebody like to move to ratify the actions of the Desk since the last meeting? | 25 |
fomc | 1,994 | So move. | 3 |
fomc | 1,994 | Without objection. Let's now move on to Messrs. Truman and Prell. | 16 |
fomc | 1,994 | [Statement--see Appendix.] | 6 |
fomc | 1,994 | [Statement--see Appendix.] | 6 |
fomc | 1,994 | Questions for either gentleman? | 5 |
fomc | 1,994 | Mike, I have a question about the inflation numbers: Last year at this time we had an unpleasant inflation surprise. This year it seems, if you look at the year-over-year comparisons at least, that the consumer inflation numbers are coming in somewhat below the forecast. Part of that is probably due to recent changes i... | 123 |
fomc | 1,994 | Well, clearly, I was trying to suggest that for someone who wanted to look for evidence that things were not going so well. We do still regard these longer trends in the indexes as quite relevant to gauging the behavior or the direction of inflation. Last year, to be sure, the spurt that we saw was, it appears now, con... | 318 |
fomc | 1,994 | Did you say that the very latest data are in accord with expectations? | 14 |
fomc | 1,994 | Current CPI. | 3 |
fomc | 1,994 | Well, the thing I'm thinking about is that the 2.4 percent change in the total CPI over the past 12 months and the 2.7 or 2.8 percent change in the core rate over the same period are a little better than expectations. | 54 |
fomc | 1,994 | Yes, for the total over recent months, we're doing somewhat better. | 14 |
fomc | 1,994 | Okay. | 2 |
fomc | 1,994 | Governor LaWare. | 4 |
fomc | 1,994 | Mike, you indicated that you thought there might be some significant revision in the first-quarter GDP number when we get the revision. Will that be at the end of this month? | 35 |
fomc | 1,994 | Yes. | 2 |
fomc | 1,994 | Would you share that with us? | 7 |
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