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fomc | 1,995 | President Melzer. | 4 |
fomc | 1,995 | I do not see any reason to change any of our rules with respect to how we communicate with the public. I think the blackout period is appropriate. It is consistent with the discussion we just had. Our monetary policy decision should come across as a decision of the group. To the extent there is a statement issued, that... | 156 |
fomc | 1,995 | As I remember what this issue was about, there was a view in the old days that we should not discuss anything related to monetary policy, which in fact includes virtually everything that everyone around this table talks about when they speak to the press. This so-called blackout is very difficult to define. I am not su... | 86 |
fomc | 1,995 | This goes back, I would say, 15 years when there was a lot of discussion in the press stemming from comments made by various members of the Committee both before and after an FOMC meeting. Some of the papers liked to do a summary story immediately before the meeting. They would do a round-robin, calling all 19 people. ... | 264 |
fomc | 1,995 | Yes. | 2 |
fomc | 1,995 | Joe, are you suggesting that it actually has been useful? | 12 |
fomc | 1,995 | It has been very useful in my view. If you are going to make the blackout period asymmetrical, I would say make it asymmetrical to the Friday following the meeting rather than for just two days. If it is only two days, then everybody will jump on it after 48 hours, and we are still going to get a lot of different comme... | 116 |
fomc | 1,995 | So, in a sense, the thrust of the announced decision of the Committee then gets diluted in the same way that consenting statements would do that. | 29 |
fomc | 1,995 | That is right. | 4 |
fomc | 1,995 | May I just raise a question? Is there any compelling reason to change the blackout period? | 18 |
fomc | 1,995 | Someone asked whether it just covered monetary policy. It was supposed to cover monetary policy and the economy--things that the Committee discusses when it is formulating monetary policy. | 33 |
fomc | 1,995 | My impression is that if a reasonably good reporter gets one of us to sit and discuss what is going on in the economy, it is a farce for us to say, "I won't discuss monetary policy but let me tell you what is going on in the economy." It is a farce because, while it may be that in the old days reporters were not very k... | 90 |
fomc | 1,995 | I was taught the blackout policy by Joe Coyne when I arrived here, and it was that one does not talk about the economy the week before and the week after. | 34 |
fomc | 1,995 | Me, too. | 4 |
fomc | 1,995 | Exactly. | 2 |
fomc | 1,995 | I think the answer to Bob Forrestal's question is that a change is not compelling if the Committee does not think it is compelling. The current blackout is a leftover from a time when we did not announce the decision when we made it. There was still some secrecy and there was a lot of speculation as to what the FOMC ha... | 97 |
fomc | 1,995 | I would like to follow up my question by expressing my belief that the blackout period as it now is constructed serves a very useful purpose. I think the change to an immediate announcement does not really affect that. I think we ought to keep it the way it is. | 53 |
fomc | 1,995 | For the same reason that the assenting statements are not desirable? | 13 |
fomc | 1,995 | Yes, exactly. | 4 |
fomc | 1,995 | There is another reason and that is that these FOMC meetings are now hyped-up more by the press--before and after--and I don't think we ought to contribute to that hype. Even though our practice is not perfect and it is only a guideline, I personally have found it to be very useful just to say, look, there are two week... | 156 |
fomc | 1,995 | Any objections to what Ed is proposing? | 8 |
fomc | 1,995 | I think, first of all, that the blackout was defined so that we never, never, never talk about what goes on at an FOMC meeting, period--whether that is one week before, two weeks before, eight weeks before, or seventeen weeks after. It is not an issue of talking about the FOMC because we never should. I have no right t... | 89 |
fomc | 1,995 | To my knowledge, as long as I have been here there has never been a breach of that confidence. | 21 |
fomc | 1,995 | That is correct and I think that is important. We should separate out the FOMC from the blackout issue. I think not talking to the press about economics or monetary policy is very useful the week before because of the issue of how we are going to vote. If we do, reporters are going to write it all up in the Sunday supp... | 204 |
fomc | 1,995 | President Melzer is on the list. | 8 |
fomc | 1,995 | I just wanted to clarify what you were saying, Alan. I think you are right in terms of individuals never being identified. We did have that very difficult period where the leaks to The Wall Street Journal and others covered Committee deliberations and positions. To make sure I understand it correctly, what I want to co... | 87 |
fomc | 1,995 | Ever. | 2 |
fomc | 1,995 | I had forgotten about that incident. | 7 |
fomc | 1,995 | Okay. | 2 |
fomc | 1,995 | That is not what this proposal is about. | 9 |
fomc | 1,995 | It is a good defense mechanism. | 7 |
fomc | 1,995 | This proposal is only about talking to the press about things that under normal circumstances we can talk to the press about. That excludes the FOMC discussion. | 31 |
fomc | 1,995 | Isn't there another element to the blackout in February and July? | 13 |
fomc | 1,995 | Because of Humphrey-Hawkins. | 8 |
fomc | 1,995 | Yes, the blackout covers the period between the meeting and the Humphrey-Hawkins testimony. | 19 |
fomc | 1,995 | Yes, okay. Mike. | 6 |
fomc | 1,995 | First of all, I think any of us can set a blackout period if we want to. We can just say, my policy is not to speak to the press for a week before, a week after, or whatever the time period is, and the press will respect that if we set it. Any of us has that ability. I can see a blackout the week before. I think it mak... | 208 |
fomc | 1,995 | I have always looked at Joe's very good guidelines as a reminder to all of us to be prudent. That can be between the meeting and the Humphrey-Hawkins testimony because we do not want to preempt what the Chairman is likely to say. That is easy because usually we do not know! [Laughter] But now that we announce the decis... | 195 |
fomc | 1,995 | Maybe Joe's suggestion is a good compromise on this. In other words, a blackout through the end of the week rather than a full week probably captures most of what everyone would be concerned about. Does anybody object to that as a solution to this dilemma? If not, Joe, why don't we just change it to be through--are we ... | 74 |
fomc | 1,995 | No, tomorrow is a Wednesday. | 7 |
fomc | 1,995 | This year we have one Wednesday meeting in November because of the BIS conflict. | 15 |
fomc | 1,995 | We can say the balance of the week of the meeting. | 12 |
fomc | 1,995 | Why don't we just leave it at the balance of the week? Okay? | 15 |
fomc | 1,995 | Fine. | 2 |
fomc | 1,995 | We have exhausted this issue. | 6 |
fomc | 1,995 | We certainly have. | 4 |
fomc | 1,995 | This issue and ourselves! | 5 |
fomc | 1,995 | Now, let us get to the easy issue of inflation targeting! It has been suggested, and I think it's a good idea, that we have pro and con statements on inflation targeting. I have asked President Broaddus and Governor Yellen to take the pro and the con. Al, why don't you get started? | 64 |
fomc | 1,995 | Thank you, Mr. Chairman. I appreciate the opportunity to make a few comments about inflation targeting. Actually, I am going to use the term "inflation objectives," if I may, because I think that describes and reflects more accurately what I have in mind. To my mind, this is an idea whose time has definitely come. Let ... | 2,170 |
fomc | 1,995 | I am strongly opposed to the adoption of formal multi-year inflation targets. I thought I would begin by outlining the case against them. This proposal has two distinct features. The first has to do with the number of goals we should be pursuing, a single goal or multiple goals. I am taking this proposal to be essentia... | 2,246 |
fomc | 1,995 | You would never have known who was speaking! | 9 |
fomc | 1,995 | I think Al laid out very well the arguments as to why setting inflation objectives would be desirable and helpful for the Committee to do in accomplishing our mandate. I took Janet Yellen's response as being a combination of implementation problems versus desirability issues, and those I think we need to discuss separa... | 572 |
fomc | 1,995 | I think there are two issues here and they tend to get mixed up. One is whether or not we should be explicit about our objectives over a reasonably long period of time. The second is whether or not we should focus solely on price stability or inflation measures as a target of monetary policy. Looking at the latter issu... | 532 |
fomc | 1,995 | Let me just say what I think the purpose of this discussion is. To go to inflation targeting without a Congressional statute is probably unwise. We do not have a Neal bill, but there clearly is going to be a Connie Mack bill that will be very close to the Neal bill, and we are going to be asked to comment on it. The ba... | 246 |
fomc | 1,995 | Alan, in general, I would associate myself with what Presidents Broaddus and Jordan had to say. I have my own two questions, a la Cathy. My first is whether we agree that the primary focus of monetary policy should be on achieving price stability. Secondly, do we agree that we are more likely to achieve price stability... | 561 |
fomc | 1,995 | Excuse me, are you talking about inflation as distinct from the price level? | 16 |
fomc | 1,995 | I think that is another issue. There are pros and cons for both of them. I don't think it is productive to get into that today, but if we could continue this discussion later, that is clearly one of the issues we ought to have the staff look at and we should discuss further. With respect to this point, clearly just ann... | 507 |
fomc | 1,995 | May I suggest that we take a break now for a short while. We have coffee out there and we will continue on with President Boehne. [Recess] | 34 |
fomc | 1,995 | President Boehne. MR.BOEHNE. I come out somewhere between President Broaddus and Governor Yellen. Over time, the primary goal for a central bank ought to be price stability, but we do not get there in a straight line. Whether we like it or not, in the real world we have to deal with short-term issues like liquidity pro... | 459 |
fomc | 1,995 | President Parry. | 4 |
fomc | 1,995 | Mr. Chairman, I think that the recommendations outlined by Al would be very useful. It would be useful, I think, for us to communicate to the public as a goal some idea of a predictable average level of inflation. I also believe we could deal with short-run cyclical issues even within the context that Al suggested. I w... | 162 |
fomc | 1,995 | President Hoenig. | 4 |
fomc | 1,995 | Mr. Chairman, as all issues go, I think both arguments have merit. I believe a couple of things: one, for us to change our emphasis, there needs to be some kind of legislation, and that is partly what this is about. Among the alternative approaches that have been discussed, I am inclined toward something like the Neal ... | 216 |
fomc | 1,995 | President Stern. | 3 |
fomc | 1,995 | My instinct is similar to that of many others in that I feel it would be a step in the right direction for us to adopt some sort of inflation objective. As others have already observed, inflation is something that the profession and the Committee believe we can be held responsible for in the long run. It is related to ... | 509 |
fomc | 1,995 | Governor Kelley. | 3 |
fomc | 1,995 | Mr. Chairman, it seems to me there are two potential ways to go here: one is primarily quantitative and the other primarily qualitative. I guess there are some hybrids. I would be very leery about a predominantly or entirely quantitative approach because I think it might very well imply performance that we would not be... | 414 |
fomc | 1,995 | President Forrestal. | 4 |
fomc | 1,995 | Mr. Chairman, I think the Yellen-Broaddus debate was very useful in setting up the merits of both sides of this issue. I think inflation targeting has a lot of appeal. The main way that it appeals to me is that it would help us to focus our policy over the long term and give us a longer-term focus than I believe we hav... | 579 |
fomc | 1,995 | Governor Blinder. | 4 |
fomc | 1,995 | As usual, let me defend the status quo. We have a dual objective in the Federal Reserve Act now. I think it works very well. I think the case that it is broken and needs fixing is extremely thin. Some of you may remember that I defended the Federal Reserve Act at Jackson Hole, thereby provoking a great deal of controve... | 716 |
fomc | 1,995 | Governor Lindsey. | 3 |
fomc | 1,995 | I think we have just proved the anti-economist adage that, if we lay all the economists in the world end to end, we will not reach a conclusion. I will at least try to touch both ends. At the last meeting I was looking for a bridge to both sides of the river; I will continue that analogy. I thank you for raising the Ma... | 755 |
fomc | 1,995 | Vice Chairman. | 3 |
fomc | 1,995 | Although the Humphrey-Hawkins Act is in fact full of goals I reduce them, as I think Governor Blinder did, to two that I describe as sustained economic growth and price stability. But I find that to be really a single goal, since I am absolutely convinced that the best way to achieve sustained economic growth is throug... | 350 |
fomc | 1,995 | Governor Phillips. | 3 |
fomc | 1,995 | We all come at this in slightly different ways. I do think it is important for any government entity or quasi-government entity, however we are classified, to communicate its long-term goals--which are not unlike a mission statement that any kind of entity would have. Inflation is probably the area where we have the mo... | 480 |
fomc | 1,995 | Governor LaWare. | 4 |
fomc | 1,995 | Mr. Chairman, the proposal for a balanced budget amendment implies to me an abject admission of total lack of self discipline on the part of the Congress. I do not think we need to make that kind of admission about our pursuit of the goal of stable prices. If we set a target, we do not get any credit for hitting it fro... | 275 |
fomc | 1,995 | President Moskow. | 4 |
fomc | 1,995 | Mr. Chairman, I am from the "if it ain't broke, don't fix it" school. It is not that the Humphrey-Hawkins bill is the ideal piece of legislation, which it clearly is not, but I think as Governor LaWare said, this FOMC has implemented it extremely well. Our record is good, and I think that opening it up now and trying t... | 571 |
fomc | 1,995 | President McTeer. | 5 |
fomc | 1,995 | On the narrow question of how to respond or testify on a Connie Mack bill, we need to be in a position to support the idea that price stability is our primary long-term goal. I would hate to see us in a position of having them offering it and us rejecting it. I agree with Ed Boehne that it is highly unlikely that Congr... | 252 |
fomc | 1,995 | Listening to this is really quite interesting. We now understand why this Committee has had difficulty confronting this issue. It is because we are as split down the middle as we could possibly get. I wonder, however, how much of the difference is real and how much is imagined. The reason I put it that way is that I as... | 1,560 |
fomc | 1,995 | Thank you, Mr. Chairman. I am sure you have heard more than you would like about Mexico's situation in the last few days and weeks. Nevertheless, I thought it would be useful to summarize the state of play with regard to the Mexican situation as of this afternoon. I will touch on five topics: first, the now apparently ... | 401 |
fomc | 1,995 | Ted, I'm sorry, we are having trouble hearing. | 11 |
fomc | 1,995 | Please speak up a little. | 6 |
fomc | 1,995 | In the end, the second alternative was chosen. The materials that were distributed to you contain several items. The first page is a statement by the President and the Congressional leadership. Despite the note on top, which is barely legible but says that the new financing package is on hold and has not yet been clear... | 1,468 |
fomc | 1,995 | Ted, what is the status of the collateral arrangements that you discussed on the conference call we had some time ago? | 23 |
fomc | 1,995 | The security arrangements with respect to the existing enlarged swap arrangement are all in place. Under this new proposal, they would remain in place behind the ESF's operations because the ESF would be committed to taking us out first. So this arrangement would be behind ours as well--any money would go to us first. ... | 116 |
fomc | 1,995 | What are the security arrangements? | 6 |
fomc | 1,995 | They are an "assured means of repayment." The way they work is that the non-Mexican customers receive irrevocable instructions from the Mexican government as of a specified date, a date which would be after a payment was due on the guaranteed bonds or whatever debt instrument we are talking about, to make their oil pay... | 173 |
fomc | 1,995 | What would that support? In a one-month period of time, what would those receipts be? | 19 |
fomc | 1,995 | I think it is about $6 or $7 billion a year, so it is about $500 million a month. The Chairman has pointed out that this is a mechanism that would allow repayment. It is also fair to say that if there were circumstances where the repayment was difficult, it might be difficult to fully enforce the mechanism. But I think... | 189 |
fomc | 1,995 | What ability do the Treasury or the ESF have to take us out of an obligation if funds are not appropriated by Congress? Do they have the ability just to say, we committed to this and we are going to pay the Fed off? | 49 |
fomc | 1,995 | Yes, they could. | 5 |
fomc | 1,995 | But if they can do that, why can't they just advance it themselves? | 15 |
fomc | 1,995 | They could, but I think they feel that it would be useful to their objectives to have a lot of people-- | 23 |
fomc | 1,995 | Can I just suggest where the funds come from? How about a credit against our payment to the Treasury? | 21 |
fomc | 1,995 | Why do we come before other creditors to the Treasury--I guess that is another way of stating the question--with regard to any funds? In other words, why do we come in front of Social Security recipients? | 43 |
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