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fomc
1,994
We do?
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Yes, it is a Federal Reserve number!
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The world gets it later. In any case, I think what is important is not so much what we know but what is known outside. It might very well be the case that by the middle of the month, roughly, our strong views on price stability could be questioned. And, therefore, we should have the capability of moving. We can move in...
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Governor LaWare.
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Mr. Chairman, one argument against policy moves at this time is this skittishness of the markets on the heels of the Orange County mess. On the contrary, I think the markets have reacted to the "Lemon" County and the Bankers Trust situations with great poise and restraint. In my opinion, the markets may be more dismaye...
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President Melzer.
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Thanks, Alan. I favor "B" asymmetric toward tightening. As I mentioned before, the response of the financial markets to our last move together with the slow growth of the aggregates convinces me that we can afford to do nothing now and observe the effects of our prior actions for a time. I must say, though, that I'm no...
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There has been some discussion that the new Congress would establish such a legislative goal.
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Yes. With regard to that issue, perhaps one thing we ought to think about would be to provide some longer-run inflation forecasts, say beyond 1995 or 1996, because, as an initial step in considering legislation, I think one could say that monetary policy is going to have its principal long-term impact on inflation. Eve...
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Governor Blinder.
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Thank you, Mr. Chairman. I agree that this is a good time for waiting. It was only 35 days ago that we raised the fed funds rate by what was essentially a record amount. The August interest rate increase was only three months before that, and by all historical standards ought not to be showing in the data as yet. That ...
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President Broaddus.
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As we all know, the Greenbook is assuming that the funds rate has to be pushed up another percentage point or perhaps even more to keep inflation from breaking out. Obviously, we can't know for sure at this stage whether that much tightening is going to be needed, and indeed as you suggested, Mr. Chairman, things may w...
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That is a very low probability.
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I would think so, and I think it is certainly a very high probability that we are going to have to do something more. The question before us this morning is whether or not we need to do some of that tightening today or whether we can put it off a little longer. I think it is a very close call. My own preference at this...
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President Hoenig.
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Mr. Chairman, I would agree with those who say that we need to take some action at some point. I think that that should be now, not later. The best environment is to do it now while sensitive to market concerns. I happen to think Governor LaWare is correct. By delaying we would risk having to do more later and having m...
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President Jordan.
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I think the main part of our problem right now is inflation psychology. It certainly reflects the lack of a nominal anchor. It suggests that it would be helpful to have a politically supported mandate to attain and maintain a stable value of the dollar. If somehow we could achieve the conditions of a true gold standard...
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Jerry, just to clarify, I favor your objective as well, but recognizing the practicalities of getting from where we are to that in a relatively short period of time and the possibility of a legislative mandate, I was suggesting that a long-term forecast may be an intermediate step we could take on our own right away. B...
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We inevitably are going to have to be discussing that because we are required to do projections of the monetary aggregates.
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Just for 1996.
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Yes, I'm looking even further out as a possibility.
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1995, excuse me.
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Governor Lindsey.
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I want to associate myself fully with Governor Blinder's views. My reasoning is similar. The first observation is that I think the November move was extremely successful. Our decision to go 75 basis points took off the market pressure in both the foreign exchange market and the bond market. I think had we moved 50 basi...
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President Parry.
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Mr. Chairman, in my view the economy has picked up more momentum since our last meeting, and the degree of tightness in labor and product markets has risen even further. Our analysis agrees with the Greenbook that further tightening is needed in order to prevent an increase in the inflation trend. Therefore, I would pr...
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President Moskow.
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Mr. Chairman, we believe that further tightening is almost inevitable because of the unexpectedly rapid pace of the expansion and the prospect of unsustainably robust growth continuing in the future. However, in light of the unusually large action at the November meeting, we recommend leaving the rate unchanged for the...
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President Forrestal.
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Mr. Chairman, I think that the case for not moving today is quite persuasive. We did move aggressively just a few weeks ago and I think we have moved aggressively throughout the year. The cumulative moves are really quite significant. We need to remember the lags in monetary policy and give some time for that to work t...
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Governor Kelley.
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Mr. Chairman, in appreciation for Governor Blinder not giving his thermostat speech I'll forego giving my inflationary teakettle speech! [Laughter] But I do think that given the momentum that we observe that it is overwhelmingly likely that we are going to need to go up at least some more; and it does seem to me that o...
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Governor Phillips.
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I also would support "B" asymmetric. I think that we have more tightening to go, but I'm willing to wait until early next year. As a general matter, I agree with Governor Kelley--if you are going to do it, earlier is better. But I think we have been given some breathing room with the favorable CPI numbers. It would be ...
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Governor Yellen.
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Mr. Chairman, I favor alternative B to hold the funds rate at 5-1/2 percent at this meeting, and I favor it for the reasons suggested in the Bluebook. I also concur with the sentiments expressed by Governors Blinder and Lindsey and President Forrestal. I think a wait-and-see strategy is reasonable, given the magnitude ...
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President McTeer.
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I agree with your proposal.
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President Stern.
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I'd favor "B" with a symmetric directive. I favor "B" because I do think we have applied some restraint and, given the lags, I think we ought to be patient and take some time to see what effects, if any, they have. I favor a symmetric directive for several reasons. Part of it is my normal antipathy to, or discomfort wi...
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Just to clarify: One of the events that is not irrelevant is how the markets respond to what's happening.
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Yes.
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And I think that that is probably the most crucial "statistic" in a sense and really the only one that could make a material difference in this period. I agree it is very hard to find data with anything crucial. But I think that there is a very important issue here, namely that we not allow our an erosion in our credib...
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I have been concerned for some time about the thermostat issue that Governor Blinder raised. We did quite a little work prior to this meeting to assure ourselves that at least as far as we could project, however deficient that projection might be, that the amount of tightening that is already in the pipeline is not suf...
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This is an interesting result we are getting. It is very clear that there is a heavy consensus for "B." However, there is a very sharp split on symmetric versus asymmetric unless we take the two members who have argued for an increase as being on the asymmetric side--but we don't usually do it that way. What I would li...
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I am reading from page 14 of the Bluebook: "In the implementation of policy for the immediate future, the Committee seeks to maintain the existing degree of pressure on reserve positions. In the context of the Committee's long-run objectives for price stability and sustainable economic growth, and giving careful consid...
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Somewhat and slightly? You said somewhat more and slightly less?
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I used somewhat with the "greater" restraint and slightly with the "lesser."
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Call the roll.
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Chairman Greenspan Yes Vice Chairman McDonough Yes Governor Blinder Yes President Broaddus Yes President Forrestal Yes President Jordan Yes Governor Kelley Yes Governor LaWare No Governor Lindsey Yes President Parry Yes Governor Phillips Yes Governor Yellen Yes
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The next meeting is January 31st and February 1st, and luncheon is served.
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Good afternoon, everyone. The first item on the agenda is the election of officers and I turn the chair over to Governor Blinder.
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For parliamentary reasons known not to me but to some people, I have the distinct honor and high privilege of opening the floor to nominations. I understand that I am not allowed to nominate anybody.
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You are the Chairman.
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The floor is open for nominations for Chairman of the Federal Open Market Committee for 1995. Do we have any nominations? [Laughter]
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This silence reminds me of last year!
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Nobody nominated!
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I nominate Alan Greenspan as chair.
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Do we have a second?
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Second.
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All in favor? SEVERAL. Aye.
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Opposed? [Laughter] I now have the honor to open the floor to nominations for Vice Chairman of the Federal Open Market Committee for 1995.
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I nominate President McDonough.
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Is there a second?
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Second.
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All in favor. SEVERAL. Aye.
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Opposed? It is done. I believe my duties are completed now.
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You did that with exemplary efficiency. I call upon our esteemed colleague to read the list of officers tentatively put before you for nomination and action.
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The list is as follows: Secretary and Economist, Donald Kohn; Deputy Secretary, Normand Bernard; Assistant Secretaries, Joseph Coyne and Gary Gillum; General Counsel, Virgil Mattingly; Deputy General Counsel, Ernest Patrikis; Economists, Michael Prell and Edwin Truman; Associate Economists from the Board: David Lindsey...
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Would somebody like to move the slate?
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So move.
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Is there a second?
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Second.
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Without objection. We now move on to the selection of a Federal Reserve Bank to execute transactions for the System Open Market Account. Is there a nomination?
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I will nominate the Federal Reserve Bank of New York.
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Second? [Pause]
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Second.
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Without objection. This is getting trickier and trickier.
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You almost lost that one, Bill!
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I was worried about that pause.
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This should have been staged better!
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Are there any objections to the selection of Peter Fisher as Manager of the System Open Market Account? If not, I will assume he is appropriately appointed. The next item is our traditional approval of the minutes, which I knew we would get to, of the December 20 meeting. Would somebody like to move their approval?
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So move.
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Without objection. The consideration of FOMC disclosure policy is now on the table, and I call upon the chairman of our subcommittee to handle that, Governor Blinder.
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Thank you, Mr. Chairman. The staff has circulated, or actually recirculated, to each of you a memo from the subcommittee that was prepared in August; it was accompanied by a lengthy and more recent memo from Virgil Mattingly on certain legal aspects. I am not going to summarize those memos; I just want to say a few wor...
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No. Actually I am agnostic on the whole issue because I really have not given it enough attention. I would be very curious to hear what the members have to say.
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So, I would also like to put that on the table. There is no proposal from the subcommittee on that issue. I think I have now put everything out on the table.
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Do you want to go piece by piece and see whether we have a consensus?
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Okay.
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It will be useful, I think, if we just have individuals raise specific questions relevant to each of the issues that you outlined. Then, at the end of the discussion, we can see whether there are significant qualifications or dissents from the subcommittee majority.
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Do you want to go issue by issue or around the table person by person?
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I think issue by issue.
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Okay. Why don't we take the question of announcements first. I reported our proposals in the inverse order of how much discussion I thought the Committee would want to give them. The first is the issue of announcements, where the proposal is to make prompt announcements of each interest rate change and not to make an a...
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With regard to announcements, I think it is clear that we ought to continue the present procedure. What I would be a little concerned about would be too much detail in the explanation. I think we have been pretty well served by the practice of explaining the reasoning but keeping it quite short. I don't see much advant...
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President Broaddus.
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On the announcements, I certainly agree that we should continue to announce policy actions immediately. With respect to the statements that accompany these announcements, I have mixed feelings about the subcommittee's recommendations. Frankly, I have some reservations--not about announcing our actions--but about making...
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President Melzer.
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First of all, I favor making statements only when there is a change in policy, not when there is no change. Secondly, I am comfortable leaving it up to the Chairman's discretion. I could imagine, for example, a change in policy where the Chairman decides not to say much at all, and I can imagine other changes where mor...
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