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fomc | 1,994 | I don't think one can rule out the possibility that the interest sensitivity of the economy in the short run may be less than it was. Certainly, we have felt all along that, without the disintermediation effects of Reg Q ceilings that we got decades ago, there wasn't going to be quite the abrupt swing toward restraint ... | 505 |
fomc | 1,994 | There are a couple of things that follow from your remarks in looking into the year ahead and contrasting it with 1994. When I started looking at your Greenbook forecasts for 1995 and 1996, on one side I welcomed the continued discipline that comes from the concern about inflation and the overriding desire to contain i... | 214 |
fomc | 1,994 | In fact, we didn't quite get back to the unemployment level in our prior forecast. We took the kinder, gentler approach to some limited degree here so that by the end of the period, we are in essence back at our point estimate of the NAIRU as it currently stands rather than somewhat above that. This means in essence th... | 178 |
fomc | 1,994 | Okay. I expected that answer. Let me follow up on it because it raises a big concern about our February meeting. Some time between now and that meeting, we have to submit projections to you whose so-called central tendencies are to be published in the Humphrey-Hawkins report. What I suspected to be the case and confirm... | 309 |
fomc | 1,994 | I don't know if there is anything I can say! It certainly occurred to me that taking these numbers just as they are might provide a somewhat unappealing forecast in the Humphrey-Hawkins report. But this forecast is not so far from the consensus view among economists that a little degree of optimism, as you suggested, w... | 176 |
fomc | 1,994 | If I could add just two points: One is--I'm not sure this is helpful--my impression that the Administration is going through much the same problem. If they think that the NAIRU is about what we have estimated it to be, they no longer are in a position to say growth will slow down to potential of 2-1/2 percent because i... | 309 |
fomc | 1,994 | Further questions? | 3 |
fomc | 1,994 | I'd like to ask a question of Mike that keys off of where he finished with Jerry Jordan. Yesterday in the briefing, Governor Yellen asked Mike a question about the difference in the forecasts attributable to the tightenings that are embedded in the Greenbook forecast but not yet acted upon by the FOMC. She cited some n... | 133 |
fomc | 1,994 | The model simulation we have done using a constant funds rate has only slightly more growth in 1995 and then appreciably greater growth in 1996. | 31 |
fomc | 1,994 | Right. | 2 |
fomc | 1,994 | By the model's assessment, that would add several tenths to the inflation rate in 1996. So in that sense, the difference here is one of stable inflation at slightly over 3 percent versus an accelerating price picture with the inflation rate moving up into the mid-3 percent range by 1996. I don't have a basis for seriou... | 252 |
fomc | 1,994 | I wasn't pushing a constant-funds-rate policy; I was just asking what the effects of that policy were, particularly on the real growth rate and on the inflation rate. On a fourth-to-fourth quarter basis, your forecast has real GDP growth decelerating from 4.1 percent in 1994, to 1.9 percent in 1995, and then to 1.8 per... | 207 |
fomc | 1,994 | I think inflation mounts because, in this alternative, we are running with an unemployment rate that remains below the NAIRU out through 1996 and presumably into 1997, so we are getting an accelerating picture. | 44 |
fomc | 1,994 | Sure. I'm only talking about the derivative. | 9 |
fomc | 1,994 | But I think that in the near term, taking into account exchange rate and import price effects and so on, the model begins to get additional inflation creeping in within 1995 and building a bit. It is very gradual and probably undiscernibly different. That again goes back to the comment I made earlier. It could creep up... | 109 |
fomc | 1,994 | I was not questioning any of that; you misinterpreted the question; it is only about the marginal effects of policy. If we have passed through the NAIRU, which seems reasonably likely, exactly what you said ought to be happening. But the marginal effect on inflation of policy tightening from today forward, to my way of... | 91 |
fomc | 1,994 | I think it would show up certainly in the tenths column, but we are talking about a matter of a couple of tenths over the next year or year and a half. | 36 |
fomc | 1,994 | Okay. | 2 |
fomc | 1,994 | It is not dramatic. I would caution that in thinking about the slowdown in the economy, one does not want to think of that as purely a straight interest rate effect. Some of it is the inevitable reversal of that cyclical dynamic in the inventory investment area that I talked about. Our inventory equations, just as othe... | 105 |
fomc | 1,994 | This reminds me of a discussion I remember having at the CEA in 1973 when everyone was talking about the small inflationary effects that were on the horizon--0.2 or 0.3 percent. Our models are really gross simplifications of the real world. As I've indicated before, simulations on reduced-form structures, which without... | 213 |
fomc | 1,994 | Mike, how much additional fed funds increase is built into your forecast? | 14 |
fomc | 1,994 | We have the funds rate moving up into the 6-1/2 or 7 percent area by early next spring. | 25 |
fomc | 1,994 | Any further questions? Let's move on to the Committee discussion. Let me just say, incidentally, that I've noticed at the last couple of meetings that our discussions of economic conditions have spilled over into an awful lot of policy at this point. I request, if you can possibly do it, that you stay with an analysis ... | 92 |
fomc | 1,994 | Mr. Chairman, it seems though that that would be easier to do if the Greenbook based its projections on where policy is currently. What we have here is a Greenbook that assumes a further tightening, the amount of which is unspecified. So that makes it very difficult for us to-- | 58 |
fomc | 1,994 | I think it was specified in the Bluebook. | 10 |
fomc | 1,994 | It is specified and you should have heard through your research director what the specific numbers were. I apologize if there was a slip in communications. | 28 |
fomc | 1,994 | I must have missed it when I read the Greenbook, but just now you said a 6-1/2 to 7 percent funds rate. Surely, it was one or the other or 6-3/4. It seems sort of vague. | 53 |
fomc | 1,994 | My point is that we think the tightening needs to be significant. I think a problem with specific numbers is that they imply a false sense of precision about what it will take. Yes, to enter something into an econometric model, we would write down 6-3/4 percent. | 58 |
fomc | 1,994 | I acknowledge your issue but still request that, if you possibly can, you stay on this side of the fence. President Minehan. | 27 |
fomc | 1,994 | Let me just kick off the regional overview. The First District continues to expand at a moderate pace. We have had a rate of job growth for the region as a whole that is behind the nation. Our unemployment numbers are about the same, and as usual there are all sorts of variations by state, with Massachusetts still lead... | 584 |
fomc | 1,994 | That is like Babe Ruth bunting a home run. [Laughter] | 15 |
fomc | 1,994 | You handed me a challenge. | 6 |
fomc | 1,994 | Peter Fisher has an announcement that I thought we ought to interpose. | 14 |
fomc | 1,994 | He's not here, but maybe I can make it. He can clarify the facts later, but let me just state that at about 9:30, the Mexicans did announce that they had moved their intervention band by 15 percent and will continue to crawl that band by four new centavos a day. So, they basically have moved the band by 15 percent. We ... | 82 |
fomc | 1,994 | [Re-entering the meeting] Actually, we do. The peso has traded at 3.83 to 3.86, down about 11 percent from yesterday; it has not approached the outer band at all. Screens in New York are not quoting the Mexican stock market, but talking to people in Mexico, the decision seems to have been taken well in Mexican markets.... | 129 |
fomc | 1,994 | If you are going to do 15 percent, you really want the market to do 10 to 12 percent on its own. | 27 |
fomc | 1,994 | Sounds just about perfect. | 5 |
fomc | 1,994 | Let's hope it doesn't happen again. | 7 |
fomc | 1,994 | The first 35 minutes. | 6 |
fomc | 1,994 | Right. It's not over until it's over. | 9 |
fomc | 1,994 | I take the longer view, an hour or so! | 11 |
fomc | 1,994 | You'd never be a good foreign exchange trader! | 10 |
fomc | 1,994 | No! | 2 |
fomc | 1,994 | As Peter mentioned in his earlier report, one problem with their monetary policy is that they have an auction today of their tesobonos and another auction tomorrow of their peso-denominated debt. Financial market reactions will depend on how they choose to play those auction results. | 52 |
fomc | 1,994 | To get good results on that or at least not disastrous results would be very helpful. President Hoenig. | 21 |
fomc | 1,994 | Thank you, Mr. Chairman. The Tenth District economy continues to grow at a healthy pace and gains remain spread across all states and all industries. Our bank directors are almost uniformly positive about current conditions and the near-term outlook for our region. One key example comes from the transportation industry... | 428 |
fomc | 1,994 | President Moskow. | 4 |
fomc | 1,994 | Mr. Chairman, economic activity on balance in the Seventh District appears to be even stronger than at the time of our November meeting. Like the Greenbook, we have raised our estimate for real GDP growth for the fourth quarter, and I expect it to be in the 5 percent range. It also seems likely that rapid growth will p... | 891 |
fomc | 1,994 | President Parry. | 4 |
fomc | 1,994 | Mr. Chairman, the Twelfth District's economy is growing solidly. Outside of California, the pace of growth is moderating in some of the intermountain states, although Oregon's economy seems to be accelerating. Economic indicators for California show continued improvement, aside from the financial problems in Orange Cou... | 1,020 |
fomc | 1,994 | President Forrestal. | 4 |
fomc | 1,994 | Thank you, Mr. Chairman. The economy in the Sixth District continues to expand, although the pace of the expansion has decelerated somewhat from the growth rates we saw earlier in the year. Consumer spending is holding up quite well. We had a rebound in retail sales right after the Thanksgiving holiday that has continu... | 821 |
fomc | 1,994 | President Broaddus. | 5 |
fomc | 1,994 | Our directors and other business contacts continue to report generally robust activity in our region with just a couple of exceptions that I'll mention in a minute. I guess the most striking anecdotal information we have gotten lately has to do with labor market conditions, which as a number of other people have noted ... | 1,031 |
fomc | 1,994 | President Stern. | 3 |
fomc | 1,994 | Thank you. For the most part, the Ninth District economy remains very strong; much of it is operating at full employment or maybe even beyond. Two interesting pieces of information have become available since the last meeting. On the anecdotal side, I think there is some accumulating evidence that housing is slowing do... | 505 |
fomc | 1,994 | That is the point I was trying to make before, Gary. This business of a 1/2 percentage point increase in inflation at an annual rate as though that means anything-- | 36 |
fomc | 1,994 | You can go from 0.2 to 0.3 of a point-- | 17 |
fomc | 1,994 | You can round the numbers to the nearest 5 percent! | 12 |
fomc | 1,994 | You can go from 0.2 to 0.3 percent per month and that gives you a percentage point right there. On a monthly basis, it doesn't look like very much. | 38 |
fomc | 1,994 | President McTeer. | 5 |
fomc | 1,994 | The economy in the Eleventh District continues to show the same healthy rate of growth that has been in place throughout 1994. We have been looking intensively for signs of slowing activity in response to tighter monetary policy. So far the only perceptible slowdown has been in single-family construction, which peaked ... | 484 |
fomc | 1,994 | I don't know how successful this is. [Laughter] Vice Chairman. | 15 |
fomc | 1,994 | Thank you, Mr. Chairman. The Second District continued recent trends of a robust economy in New Jersey and a slowing expanding economy in New York State. Data for the most recently available month indicate that employment grew 2.7 percent in New Jersey and stagnated in New York. Consumer sales throughout the District i... | 570 |
fomc | 1,994 | Sounds like a leap to me. President Jordan. | 10 |
fomc | 1,994 | Thank you. With regard to Orange County-type developments, before that drove everything else off the newspapers, we were getting a number of similar reports in our area. Cuyahoga County lost $150 million, which they say is equivalent to a new football stadium, so we have a team for sale. And it appears now that the sta... | 1,068 |
fomc | 1,994 | President Melzer. | 4 |
fomc | 1,994 | In the third quarter, nominal GDP was up 6.7 percent from a year earlier, the largest year-over-year rise in five years. More recently, nominal retail sales rose at a 15.1 percent annual rate from July to November, the fastest four-month pace since the spring of 1987. There are few signs yet that our monetary policy ac... | 539 |
fomc | 1,994 | Unfortunately, President Boehne had to leave because of an emergency he had to attend to. I'd like to ask Rick Lang whether he could give us a brief survey of what is going on in the Third District. | 43 |
fomc | 1,994 | Thank you, Mr. Chairman. The Third District economy continues to expand but at a more moderate pace than in the nation as a whole. Employment levels in several areas of the District still have not reached their pre-recession levels. Manufacturing activity continues to be one of the strong points; its levels continue to... | 237 |
fomc | 1,994 | Thanks very much. Governor Lindsey. | 7 |
fomc | 1,994 | Thank you, Mr. Chairman. I'll try and stay entirely on the right side of the fence by talking about fiscal policy! [Laughter] I have three observations to make: First, we are now getting the first indications of the effects of the 1993 tax law changes. I have presented scoring stories to this group before. I want to st... | 153 |
fomc | 1,994 | That is for individuals? | 5 |
fomc | 1,994 | Yes, I'm looking at the individuals' side here. Personal income rose 4.3 percent between 1992 and 1993. | 28 |
fomc | 1,994 | What was it without transfer payments? | 7 |
fomc | 1,994 | Slightly below that--4.1 percent. But there are offsetting factors. I could go on for too long, but you don't want me to. | 33 |
fomc | 1,994 | I don't! | 3 |
fomc | 1,994 | The general approach to estimating, given the adjustments the Chairman is talking about, would be to take per-tax-return personal income. The elasticity of receipts with respect to per-return personal income based on the index used for inflation is 1.0. The elasticity for real increases is about 1.5. The inflation inde... | 1,634 |
fomc | 1,994 | Sounds like a 30-year bond rate of 5 percent! Governor Kelley. | 16 |
fomc | 1,994 | Mr. Chairman, in the spirit of "contain yourself to what you see," what I see is what I've heard all morning--a very strong economy where the risks are rather heavily skewed to the up side. Let me take just a minute to mention two other matters. The first, which has been alluded to a couple of times this morning, is th... | 457 |
fomc | 1,994 | Governor Phillips. | 3 |
fomc | 1,994 | Thank you. Our discussion has demonstrated the depth and the breadth and the resilience of the economy. These are terms that we usually use for market conditions, but we could certainly apply them to this expansion period. We are closing in now on four years of economic expansion. Growth in three of those years is now ... | 1,067 |
fomc | 1,994 | Governor LaWare. | 4 |
fomc | 1,994 | Mr. Chairman, if the staff projection for the fourth quarter is correct, we clearly have a more vibrant economy than most of us had expected and the surprise is the lack of inflation flares in the current figures. I am somewhat puzzled by the Greenbook projection for the first quarter of 1995. The abrupt GDP slowdown s... | 308 |
fomc | 1,994 | The flood gate was it? | 6 |
fomc | 1,994 | I've learned my lesson! | 5 |
fomc | 1,994 | A less-than-successful building project. | 8 |
fomc | 1,994 | Yes, that is right! | 6 |
fomc | 1,994 | That is really true. | 5 |
fomc | 1,994 | Governor Blinder. | 4 |
fomc | 1,994 | I think the wall was extremely successful. I'm not going to breach it. I'm also going to be very brief since, coming almost at the end, almost everything that I might have said--and its opposite--has already been said! [Laughter] Let me take a few minutes to defend the conventionality of the Greenbook forecast against ... | 1,453 |
fomc | 1,994 | Governor Yellen. | 4 |
fomc | 1,994 | My opinion concerning the strength and likely future direction of the economy has changed just marginally since our last meeting. Certainly, the evidence has continued to accumulate that we have an economy with a very good head of steam. We see that in the employment report, a significant rise in the help wanted index,... | 493 |
fomc | 1,994 | Thank you. Is coffee available? | 7 |
fomc | 1,994 | Yes. | 2 |
fomc | 1,994 | Let's take our usual break. | 6 |
fomc | 1,994 | [Statement--See Appendix.] | 6 |
fomc | 1,994 | Questions for Don? If not, why don't I start as usual? I'm impressed with the extent to which it is very difficult to find any negative factors in the current outlook. You can not find it in the order patterns, which are strong across the board. There are very few firms outside the defense-related area or long-term tur... | 1,938 |
fomc | 1,994 | Mr. Chairman, I support your conclusion that alternative B with an asymmetric directive is appropriate. As I remarked earlier, the degree of uncertainty about the effect of existing monetary policy suggests waiting. Also, the markets are very thin as Joan described earlier, and as Susan Phillips suggested we could have... | 158 |
fomc | 1,994 | Industrial production we get much earlier. | 7 |
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