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fomc
1,978
But it only has a one-third impact, given the fact that M1 is currency and demand deposits--
21
fomc
1,978
Yes, but it's in the M2.
9
fomc
1,978
Two-fifths.
5
fomc
1,978
Larry.
2
fomc
1,978
If this is the month for confessing, I must confess that I'm neither a monetarist nor an economist but I am a realist, I think. And there are certain things about this posture we find ourselves in today which I think realistically ought to be observed. First of all, we're between a rock and a hard place; we're in an aw...
430
fomc
1,978
Thank you. Paul.
5
fomc
1,978
Well, I am really struck, Mr. Chairman, in listening to all of this by the difference in semantics used by members of the Committee. They are not reflected very much as differences in prescription.
40
fomc
1,978
The figures are closer than I would have thought.
10
fomc
1,978
Virtually everybody is 7-1/4 on the downside of the federal funds range and the whole difference in the range is split between 7-3/4 and 8 essentially and split between 7-3/8 and 7-5/8, it would seem, for the midpoint. The language sounded like a bigger difference than that, somehow. My own feeling is somewhat reinforc...
578
fomc
1,978
Well, hearing all that, let me see if I can come up with a proposal to be voted on. Let me start off with what I think is an easy one looking down the list. Six people--a majority of 7, if I include myself--say 7-1/4 to 7-3/4 for the range of the fed funds rate. My own preference would be to operate in a mode from wher...
270
fomc
1,978
Is the midpoint 7-3/8 or 7-1/2?
17
fomc
1,978
Well, I would make the midpoint 7-3/8 but expect the Desk to be moving to 7-1/2.
28
fomc
1,978
I see. And you wouldn't want them to go above 7-1/2 no matter how strong the aggregates.
24
fomc
1,978
Well, I think I would like to consult with people just to see where we stand. Maybe we have to go further than that.
27
fomc
1,978
Mr. Chairman, you've introduced a new procedure that I suspect is not going to serve us as well as that under which we have been operating--namely that we set a range and then don't use it until we have had another meeting.
48
fomc
1,978
That has been the procedure for the last few meetings. I've been there. The first meeting was we don't go above a certain level until we consult and the second meeting was the same thing. So if I am setting a new procedure, it's news to me.
52
fomc
1,978
Well, I mean by that our practice. It strikes me that we had compelling reasons to do that in the previous meetings. And as a result of the way we've moved, it strikes me that at the present moment we would be better served to [go to] whatever midpoint the Committee agrees upon and if we agree on the 7-3/4 top limit th...
134
fomc
1,978
Well, I would not feel comfortable myself with just turning it loose to 7-3/4. I just have to be frank; I would be uncomfortable with that.
35
fomc
1,978
Well, I differ with that judgment.
8
fomc
1,978
I would have to say that's my judgment. Let's take a vote on the proposal I've made. If we don't have a majority, then we'll take a vote on another proposal.
35
fomc
1,978
I really interpreted it the way you said it as kind of a 7-3/8 to 7-1/2 midpoint.
28
fomc
1,978
Yes, that's right.
5
fomc
1,978
Okay.
2
fomc
1,978
That's absolutely right. But I didn't want it to go above 7-1/2 without some consultation with the group because I think it may have some broader implications--that's all. So where are we, Mr. Secretary?
46
fomc
1,978
Why not have just a show of hands?
9
fomc
1,978
Well, whichever you like.
6
fomc
1,978
You can have the formal vote later.
8
fomc
1,978
All right. How many of the voting members would be willing to accede to that proposal?
19
fomc
1,978
Five.
2
fomc
1,978
Okay. And how many would not?
8
fomc
1,978
Six.
2
fomc
1,978
Okay. And what differences do you want?
9
fomc
1,978
Mr. Chairman, may I suggest that my objection is registered largely on your 7-3/8 midpoint? I would take the 7-1/2 midpoint and I would permit the Desk to go on to the 7-3/4 percent. I have no objection to consultation. You can call a meeting of the FOMC by telephone any time you like or you can send a wire out.
84
fomc
1,978
I'm sorry, I don't understand. What's different from what I said then--just the 7-1/2?
24
fomc
1,978
Well, my principal point is that I think we ought not to put a cap on the 7-1/2 right now and merely say that's going to trigger a meeting. I think we ought to move to the 7-1/2 promptly. That's my biggest difference here.
58
fomc
1,978
How many of you would prefer that?
8
fomc
1,978
Five.
2
fomc
1,978
We are just voting on the narrow question of whether we prefer to go to 7-1/2 immediately or whether, if we do that, we can then accept the rest of the package?
40
fomc
1,978
Well, I think we were voting on the whole package with that change.
15
fomc
1,978
How immediate is immediate?
5
fomc
1,978
Just as we normally do, Paul. I wouldn't change the normal arrangements of this.
17
fomc
1,978
But last time we went on Wednesday.
8
fomc
1,978
But that's not a normal arrangement.
7
fomc
1,978
No, I understand we're not going tomorrow.
9
fomc
1,978
We shouldn't go immediately after Thursday because if the preliminary indications stand up, then Thursday there would be a considerable drop [in the money supply figures we publish], which is not unexpected, but wouldn't be consonant with a move.
45
fomc
1,978
But, Paul, the position I think is right. We are at 7-3/8 now and edging on up to 7-1/2 is no big deal right now.
39
fomc
1,978
I must say that I don't think people generally recognize that we are at 7-3/8. They may see that we've had an average that has been a little above 7-1/4. I think there are a considerable number of people in Washington who think [our objective] is 7-1/4.
67
fomc
1,978
That may be true. But I think the concerns of the market may be useful--
17
fomc
1,978
Peter.
2
fomc
1,978
I think the market perceives us as at kind of a tight 7-1/4--7-1/4 ranging a little [above it].
32
fomc
1,978
That's not the language of the directive.
8
fomc
1,978
I think the account of it in the New York Times this morning was not a bad one. The comment was that he thinks the target is still 7-1/4 but it's a damn curious 7-1/4.
47
fomc
1,978
That you don't want to go below that.
9
fomc
1,978
The rate had averaged 7-3/8 through yesterday but today it's a little softer. It started out at 7-5/16 and it has been at 7-1/4.
41
fomc
1,978
I think [going to] 7-1/2 is a considerable move. I think we will make it in a week or 10 days or so, but I don't--
37
fomc
1,978
I'm not quite sure where we are, Mr. Chairman. As I understand it, with Mr. Coldwell's amendment the presumption is we go to 7-1/2 over the course of the next week or so.
47
fomc
1,978
Of course not tomorrow.
5
fomc
1,978
That was my proposal originally--that we edge up to 7-1/2. The only difference I see is whether or not there's consultation [before we go] above 7-1/2.
42
fomc
1,978
So far as I'm concerned, you can have a consultation whenever you want. If you want to have it at 7-1/2, I certainly am not going to vote against that.
39
fomc
1,978
So where are we split on the votes then? I'm not sure I understand. Is it on the ranges for M1 and M2? As I look down the list here 1, 2, 3, 4, 5, 6 people suggested--7 actually--no higher than a 7-1/2 for the midpoint. So is that what--
77
fomc
1,978
Well, I can certainly agree with Governor Coldwell's amendment--if it is an amendment. I suspect other people can, too, but I don't know about that.
34
fomc
1,978
A week to 10 days, Phil?
9
fomc
1,978
A week to 10 days; that doesn't bother me a bit.
14
fomc
1,978
All right, I can accept that.
8
fomc
1,978
Okay, let's try it again. Let's be sure what we are talking about, though. Do you have any problem with the M1 and M2 ranges? To repeat, they are 3 to 8 and 4 to 9. The range on fed funds is 7-1/4 to 7-3/4, moving to 7-1/2 in a week to 10 days after looking at the Thursday numbers. And I must say that I intend to get b...
142
fomc
1,978
What statistical event, then, would trigger the upper figure?
12
fomc
1,978
The statistics that would mean that we can't live within these ranges without going higher [on the funds rate]. And I want everybody to look at what is happening in the economy, the revision of the first quarter, and--
44
fomc
1,978
Well, I think a perception that the aggregates were consistently above the midpoint of these ranges--
18
fomc
1,978
Yes.
2
fomc
1,978
In that case, the projections would dictate an immediate consultation because the projections are for 6-1/2 [percent M1 growth].
28
fomc
1,978
All right, how about that one? Therein is a question. Suppose we end up and have a surprise--we have a negative. Suppose money behaves differently [than we expect] in the next week. What we would do then? Go to the 7-1/2 regardless?
59
fomc
1,978
If it's really negative--
5
fomc
1,978
I don't think that's a problem. Why don't we just [vote]. We'll take care of that if necessary. So, is there a vote on this one? How many would favor what you think the proposal is?
43
fomc
1,978
Tell me what the funds rate is. What's the range?
12
fomc
1,978
The funds rate range will be 7-1/4 to 7-3/4, with the plan to move it up to 7-1/2 in the next week to 10 days after looking at [developments].
49
fomc
1,978
What I wanted or hoped for is a consultation before we went above 7-1/2.
20
fomc
1,978
Yes, I'm going to do that.
8
fomc
1,978
That's what the Chairman has the right to do.
10
fomc
1,978
That's what I'm going to do.
7
fomc
1,978
He has expressed his opinion.
6
fomc
1,978
Yes, I'd rather not have it in the directive.
11
fomc
1,978
I'd rather not have it in the directive.
9
fomc
1,978
I don't think we should.
6
fomc
1,978
Okay, how many of the voting members are for this particular one?
14
fomc
1,978
Eight.
2
fomc
1,978
Let's call the roll.
5
fomc
1,978
Yes, Mr. Chairman, do you want to get the type of directive [in this vote as well]?
22
fomc
1,978
Aggregates.
3
fomc
1,978
Let's see who's for this, and nobody will be locked in until we clear the language.
18
fomc
1,978
This is an informal poll. Chairman Miller Yes Vice Chairman Volcker Yes President Baughman Yes Governor Coldwell Yes President Eastburn Yes Governor Gardner Yes Governor Jackson Yes Governor Partee Yes Governor Wallich Yes President Willes No President Winn Yes
48
fomc
1,978
Now may I turn to the language? If it's inappropriate to consider the changes in the directive language at this meeting because of the lateness or anything, we can defer it. My point in suggesting it is because I find around Washington that people think we are doing something different than I think we are--in fact the ...
76
fomc
1,978
Mr. Chairman, the way it is written I think is quite a distance from where we are now. It's more in the direction of an interest rate oriented, and less of an aggregates oriented--
39
fomc
1,978
Let me read you some language. Let me read first the language of your present directive, which says what you have been saying, "Specifically, at present, it expects the annual growth rates over the May-June period to be within ranges of" so-and-so to so-and-so. That's read in the world as meaning that we are forecastin...
519
fomc
1,978
What was that early language again, sir?
9
fomc
1,978
The changed language? You probably all have this before you. If you don't, it suggests changing the sentence that [talks about] the specific level [of the funds rate]. It would read: In deciding on his specific objective for the federal funds rate, the Manager shall be guided mainly--this "influenced" is a bad word--by...
127
fomc
1,978
This seems to be a much more accurate description.
10
fomc
1,978
That's what we are really doing, and that's why I was trying to--
15
fomc
1,978
I realize some people might not like the "mainly," but since we referred earlier to money market conditions including foreign exchange market conditions it isn't correct unless we have--
33
fomc
1,978
But since you are the author--
7
fomc
1,978
But some people might prefer just "guided by."
10