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fomc | 1,994 | Yes, the next sentence-- | 6 |
fomc | 1,994 | Okay. Read that sentence. | 6 |
fomc | 1,994 | "The monitoring range for growth of total domestic nonfinancial debt was maintained at 4 to 8 percent for the year." | 24 |
fomc | 1,994 | Call the roll. | 4 |
fomc | 1,994 | Chairman Greenspan Yes Vice Chairman McDonough Yes Governor Blinder Yes President Broaddus Yes President Forrestal Yes President Jordan Yes Governor Kelley Yes Governor LaWare Yes Governor Lindsey Yes President Parry Yes Governor Phillips Yes | 44 |
fomc | 1,994 | Okay, the next vote that we need is for 1995 with the same ranges for M2 and M3 but a lower range for the debt aggregate. | 32 |
fomc | 1,994 | All right. "For 1995, the Committee agreed on tentative ranges for monetary growth, measured from the fourth quarter of 1994 to the fourth quarter of 1995, of 1 to 5 percent for M2 and 0 to 4 percent for M3. The Committee provisionally set the associated monitoring range for growth of domestic nonfinancial debt at 3 to... | 121 |
fomc | 1,994 | Call the roll. | 4 |
fomc | 1,994 | Chairman Greenspan Yes Vice Chairman McDonough Yes Governor Blinder Yes President Broaddus Yes President Forrestal Yes President Jordan Yes Governor Kelley Yes Governor LaWare Yes Governor Lindsey Yes President Parry Yes Governor Phillips Yes | 44 |
fomc | 1,994 | I don't think--do we need a vote on that Riegle request? | 16 |
fomc | 1,994 | I don't think so. | 5 |
fomc | 1,994 | I think I got the consensus for trying to embody many of the notions that Jerry Jordan, Al Broaddus, and Tom Melzer proposed, namely that we provide a general qualitative view of our goals and their distinction from forecasts in reference to policy and try to put it all in a language form that says less than it sounds.... | 151 |
fomc | 1,994 | In fact, could I say one thing? I'll speak for myself, but I think it does reflect the mood of the Committee and the actions we have been taking since February. With regard to 1996, had we not been moving this year so far in the way that we have to establish our current policy stance, by late this year and 1995 inflati... | 109 |
fomc | 1,994 | You mean in discussing the forecast for 1996? | 11 |
fomc | 1,994 | Right, and characterizing 1996. The uncertainty about 1996 is the effectiveness of our actions in 1994. If we are successful in what we are doing in 1994, then we are going to have higher output and lower unemployment in 1996. And that is the difficulty in giving them a forecast of what 1996 is going to do. | 76 |
fomc | 1,994 | I think we have been saying something not dissimilar to that without mentioning the year. Coffee is available and we will reconvene in 15 minutes. | 30 |
fomc | 1,994 | Mike and I were just discussing this morning's Washington Post and how I should adjust my presentation. Have you seen this morning's Washington Post? | 28 |
fomc | 1,994 | I haven't read it yet. | 6 |
fomc | 1,994 | I'll let Mr. Prell tell you himself. | 10 |
fomc | 1,994 | No. [Laughter] | 6 |
fomc | 1,994 | Don't keep us in the dark. | 7 |
fomc | 1,994 | The Post article carried an excerpt from the 1987 transcripts in which I said something to the effect that, given the lags of policy, we either should tighten or should ease, but I didn't know which. [Laughter] | 47 |
fomc | 1,994 | This was cited as evidence of confusion and uncertainty in Federal Reserve thinking! | 14 |
fomc | 1,994 | Another interpretation is that we are basically saying that the status quo is unacceptable. [Laughter] | 19 |
fomc | 1,994 | I have been trying so hard all these years not to get quoted in the press! | 17 |
fomc | 1,994 | Mr. Kohn. | 5 |
fomc | 1,994 | Well, I am sure I won't relieve any of the current uncertainty here and probably will add to it. [Statement--See Appendix.] | 27 |
fomc | 1,994 | Questions for Don? If not, why don't I start off. I think it's fairly apparent that if we move today, the general view is going to be that we moved in order to support the dollar. I don't deny that monetary policy has a significant effect on our exchange rate, but I think it's important for us to review just why it doe... | 1,489 |
fomc | 1,994 | Exactly right. [Laughter] | 7 |
fomc | 1,994 | On the basis of the overall data that we get from the unemployment insurance system with a significant lag, we essentially are picking up what the BLS calls the "bias adjustment" in the small business sector. It's probably fairly accurate going back in history. However, there is this plugged bias adjustment which BLS p... | 568 |
fomc | 1,994 | Or going sideways! | 4 |
fomc | 1,994 | I don't think we know how far the unwinding of the growth rate will go, leaving aside where we are starting from, which I think may be higher than the GDP figures are indicating. As a consequence, I would be inclined at this stage to stay with "B," largely because, unless we tighten by 300 basis points, I think the eff... | 739 |
fomc | 1,994 | Mr. Chairman, I agree with your wait-and-see recommendation. When we do act again, I think we shouldn't consider a 1/4 point change; it ought to be 1/2 point, but I think 1/2 point right now would be premature. We did get a stronger first quarter than we expected, and it looks as if we are going to get a good number fo... | 388 |
fomc | 1,994 | Would you view not making an announcement as consistent with saying "the meeting is over, we have nothing to say" or did you want to just let it ride? | 33 |
fomc | 1,994 | For this meeting if we have done nothing, I think I'd just go back to not issuing a press release. | 22 |
fomc | 1,994 | Don, why don't you comment on what the other side of that argument is just to-- | 18 |
fomc | 1,994 | Mr. Chairman, I was hoping, as President McTeer was suggesting, that we would be in the position by now of having established a regular announcing time. | 33 |
fomc | 1,994 | 2:15. | 4 |
fomc | 1,994 | And if an announcement is not made by that time, it would be clear that no action had been taken. I think I'd ask Joan Lovett and maybe Joe Coyne to comment. Both of them have some concerns that not announcing would leave people on edge and guessing that something was going on, with a result that could be a bit disrupt... | 71 |
fomc | 1,994 | Yes, I think there is something to be said for letting the market know that the meeting has concluded. In terms of what announcements the market is looking for out of this Committee when there is no action, I have to say they haven't got a clue. They know that decisions on how to handle these announcements have not bee... | 147 |
fomc | 1,994 | Yes, but that is not to prejudge what we are going to do in the future. | 19 |
fomc | 1,994 | It's to buy time until the Committee has had a longer discussion on this. That is what they are thinking. | 22 |
fomc | 1,994 | Mr. Chairman, there was a subcommittee that looked at this some months ago. Others on that Committee might want to chime in, but as I recall there was a fairly strong consensus after a number of discussions that we ought to announce only when we change policy. However, I think today is a very awkward day, and whatever ... | 204 |
fomc | 1,994 | There is an issue here, and at some point--it will not be this meeting and I'll try to discuss why at lunch--we have to be able to lay out what our new disclosure policy is going to be. At that point we will make it very explicit. This discussion is presupposing the substance of that meeting; I didn't mean to get into ... | 115 |
fomc | 1,994 | Yes. | 2 |
fomc | 1,994 | Vice Chairman. | 3 |
fomc | 1,994 | Mr. Chairman, I agree that we definitely should not make a policy move today, because I think there is no doubt whatsoever that the move would be associated with an effort to strengthen the dollar. For reasons you have cited, I believe the only way to help a reserve currency is to manage domestic monetary policy approp... | 346 |
fomc | 1,994 | Let me just say that I forgot to mention that I would very much like to call on the Committee in a conference call if events are such that some significant action is required. I would prefer that, implicit in the asymmetric directive, we left open the possibility of a conference call if numbers or events are moving in ... | 83 |
fomc | 1,994 | Thank you. I agree we shouldn't act on the basis of strictly international considerations because ultimately the foreign international market's purchasing power for currencies is going to reflect what we are doing domestically. I don't have a sense that within the marketplace today the problems we are seeing in the int... | 307 |
fomc | 1,994 | Can I just ask for a clarification? | 8 |
fomc | 1,994 | Yes. | 2 |
fomc | 1,994 | Does that affect the rate of change in the exchange rate or does it bring it to a different level? In other words, if there is net repatriation of say $150 billion a year, is that consistent with a continuous erosion of the dollar vis-a-vis the yen, or does it merely specify a level that it adjusts to and stays at unti... | 77 |
fomc | 1,994 | The portfolio balance model will tell you that if you try to repatriate funds and your currency appreciates, that is the way you reduce the foreign share in your portfolio. | 34 |
fomc | 1,994 | But does the currency's appreciation consistently go up instead of-- | 12 |
fomc | 1,994 | The theory does not give an answer; it could be either one. It's one person's decision; they all add to one so we ought to treat everybody as one person. They can't as a group reduce their foreign assets because of constraints on flows; they have to leave those assets abroad. They may add to them, but they have to have... | 72 |
fomc | 1,994 | I don't think you can answer in part because you need to know more fully what is happening on the trade side. Japan as we know is one of these economies where the net value added is all labor inputs because they import everything else. So their imports of raw materials, energy, and all of that give you the price effect... | 493 |
fomc | 1,994 | First Vice President Minehan. | 6 |
fomc | 1,994 | On the matter of policy, I have been impressed that things keep coming in a bit stronger than expected. I realize we are beginning to see indications of some slowing, probably as a result of the actions that were taken earlier this year. Even so, I think the risks for the rest of the year, given the depreciation of the... | 202 |
fomc | 1,994 | No. | 2 |
fomc | 1,994 | It doesn't? | 3 |
fomc | 1,994 | It doesn't mean that. | 5 |
fomc | 1,994 | Okay. | 2 |
fomc | 1,994 | We don't have a specific formulation. Asymmetry merely means a general sense of the Committee's disposition or the direction of our bias. | 27 |
fomc | 1,994 | How long we should expect you to wait before making a change? | 13 |
fomc | 1,994 | No, I have tried to articulate this and I have been much too specific, so I'll call on Don Kohn. [Laughter] | 28 |
fomc | 1,994 | As I said in my briefing, the use of asymmetry in the past has been an expression of the Committee's disposition about how it would like to react to incoming data. If you think the risks are more on one side than on the other and if for example you would like to react to stronger data before you reacted to weaker data,... | 129 |
fomc | 1,994 | Fine-- | 2 |
fomc | 1,994 | It's sort of leaning to one side in reacting to incoming data. | 13 |
fomc | 1,994 | Let me be very specific using Jerry Jordan's CPI as the model. Let us assume our normal expected CPI just for the sake of argument was .3 percent and we were asymmetric toward tightening. If the CPI came in at 0, we probably wouldn't move. If it came in at .6 percent, we would tighten. | 65 |
fomc | 1,994 | Regardless of whether we were symmetric or asymmetric. | 9 |
fomc | 1,994 | No, I'm just talking about asymmetric. | 8 |
fomc | 1,994 | Does symmetric tie your hands? | 6 |
fomc | 1,994 | Well, let me give another example: Say we expect a CPI of .2 percent, we are symmetric, and the CPI comes in at -.1 percent or alternatively at .5 percent. This is a strained example, but there is a different disposition depending on whether one takes a specific figure as being an aberration or a more fundamental chang... | 150 |
fomc | 1,994 | Is that fully clear to you? | 7 |
fomc | 1,994 | Yes, I am really clear on this. [Laughter] I am leaning toward the side of buying insurance on the up side, but I am a bit concerned about moving strongly one way or the other on any particular number. I think six-week intervals are enough time to look at things and see how they shape up. So, I guess I come out on the ... | 97 |
fomc | 1,994 | Governor LaWare. | 4 |
fomc | 1,994 | Mr. Chairman, for all the reasons that you have suggested I support the recommendation for "B." Ordinarily, I prefer symmetric language, but in the current circumstances I think it's appropriate to indicate a bias on the up side, so asymmetric language is satisfactory to me. I think we have to make an announcement. I d... | 106 |
fomc | 1,994 | Governor Lindsey. | 3 |
fomc | 1,994 | Mr. Chairman, I agree with "B" for the reasons you indicated. However, I strongly, avidly am against asymmetry. My reasons are twofold. First of all, if we look at our four moves to date this year, the most efficient ones with regard to the move in the long rate relative to the move in the short rate were in May and in... | 470 |
fomc | 1,994 | Can I ask Don Kohn--I don't disagree with your evidence of the four moves--but what is the history of market responses to policy actions taken at or in-between meetings? Would you know offhand? | 42 |
fomc | 1,994 | I don't know offhand. | 6 |
fomc | 1,994 | My recollection is that the proposition you state generally is not necessarily true. | 15 |
fomc | 1,994 | But has it-- | 4 |
fomc | 1,994 | It has been true this year, but that is four observations and you are enough of a statistician to know that you need five. [Laughter] | 31 |
fomc | 1,994 | I think in the past, Mr. Chairman, a number of these intermeeting moves have been made after releases of data. The markets often tend to move ahead of us and then barely react when we move--say, when we were in the process of easing. But that evidence is not definitive, I would say. | 64 |
fomc | 1,994 | President Broaddus. | 5 |
fomc | 1,994 | This is a confusing period, Mr. Chairman. I thought you laid it out very well in your statement. And I guess I find it helpful in a situation like this to stand back sometimes from what's going on currently and refocus on our longer-term goals and objectives. We are on the record as aiming to gradually reduce the infla... | 802 |
fomc | 1,994 | President Forrestal. | 4 |
fomc | 1,994 | Mr. Chairman, as I look at the domestic economy alone, I have a slightly different view than you do in the sense that, as I said yesterday, I think there is more symmetry there than asymmetry. That is to say, in my mind the risks are probably fairly evenly balanced. It's pretty clear from the evidence and from the disc... | 462 |
fomc | 1,994 | President Parry. | 4 |
fomc | 1,994 | Mr. Chairman, I would support alternative B because I think the extent and duration of the moderating growth are uncertain at this point. I do think, though, that we may receive information in the next several weeks that will indicate more clearly whether this moderating is going to continue, or if we are going to foll... | 164 |
fomc | 1,994 | I forgot about that; that is an important point. It might be useful, irrespective of what is going on, just to have a telephone conference after Humphrey-Hawkins. | 36 |
fomc | 1,994 | Right. As far as an announcement is concerned, I think one is probably necessary following this meeting. It seems to me that to announce the fact that the meeting is over is subtle enough that I am sure markets could deal with that! Finally, unless I am missing something, the discussion about waiting until a bad CPI nu... | 159 |
fomc | 1,994 | President Melzer. | 4 |
fomc | 1,994 | I have a lot of sympathy for the views Al Broaddus expressed earlier. In terms of reasons to act, the dollar is not a reason to act. I think there is information in the behavior of the dollar. I accept what Jerry and others have said about the dollar/yen, but I think there is a depreciation going on more broadly on a t... | 661 |
fomc | 1,994 | President Boehne. | 5 |
fomc | 1,994 | I favor staying where we are today both for international as well as domestic reasons. I agree with your observations that we would have to have a very large bullet to be credible in terms of the dollar, and I don't think we ought to use that today; it's much wiser to keep our powder dry and wait for a more demanding d... | 343 |
fomc | 1,994 | President Keehn. | 4 |
fomc | 1,994 | Mr. Chairman, I came to the meeting in favor of alternative B with a bias toward tightening. I think you made a very strong case for that choice, and I certainly support that. Even so, I would slightly favor symmetric language, not because I think an asymmetric policy is an inappropriate stance--I think our next move i... | 205 |
fomc | 1,994 | Governor Kelley. | 3 |
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