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fomc | 1,995 | President Boehne. | 5 |
fomc | 1,995 | It's in times like this that we wish we had measures of the money supply and reserves that would accurately reflect the stance of monetary policy. I think if we did, it would clearly show that there has been a tightening of policy. But we don't have those measures, and we are stuck with the federal funds rate. There is... | 455 |
fomc | 1,995 | Thank you. There is a consensus for a 25 basis point decline in the funds rate and a symmetric directive. | 23 |
fomc | 1,995 | The wording of the operational paragraph is on page 15 of the Bluebook: "In the implementation of policy for the immediate future, the Committee seeks to decrease slightly the existing degree of pressure on reserve positions. In the context of the Committee's long-run objectives for price stability and sustainable econ... | 113 |
fomc | 1,995 | Call the roll. | 4 |
fomc | 1,995 | Chairman Greenspan Yes Vice Chairman McDonough Yes Governor Blinder Yes President Hoenig Yes Governor Kelley Yes Governor Lindsey Yes President Melzer Yes President Minehan Yes President Moskow Yes Governor Phillips Yes Governor Yellen Yes | 44 |
fomc | 1,995 | The next meeting is January 30-31, 1996, and I now move to adjourn. | 22 |
fomc | 1,996 | This is, as you know, our organizational meeting and I turn the figurative gavel over to Governor Kelley to run the proceedings. | 27 |
fomc | 1,996 | Thank you, Mr. Chairman. It happens that I am the senior member of the Board present, and so I have the honor of asking for nominations for the Chairman of the Federal Open Market Committee for the year ahead. | 44 |
fomc | 1,996 | I nominate Alan Greenspan. | 6 |
fomc | 1,996 | Thank you. Is there a second? SEVERAL. Second. | 14 |
fomc | 1,996 | I hear a motion and a second. Any other nominations? Hearing none, I declare the nominations closed. All in favor say "Aye." SEVERAL. "Aye." | 37 |
fomc | 1,996 | Opposed? Congratulations, Mr. Chairman. | 9 |
fomc | 1,996 | I love democracy! [Laughter] | 8 |
fomc | 1,996 | At the Chairman's request, I will proceed very quickly to the Vice Chairmanship where nominations are now declared open. | 23 |
fomc | 1,996 | I nominate William J. McDonough, President of the Federal Reserve Bank of New York. | 19 |
fomc | 1,996 | Thank you. Any seconds? | 6 |
fomc | 1,996 | Second. | 2 |
fomc | 1,996 | That one came a little slowly, Bill. [Laughter] Any other nominations? If not, I declare the nominations closed. All in favor of Mr. McDonough for Vice Chairman signify by saying "Aye." SEVERAL. "Aye." | 53 |
fomc | 1,996 | Opposed? Congratulations, sir. Mr. Chairman, do you want to proceed from there? | 19 |
fomc | 1,996 | Yes, I'd like to turn it over to Normand Bernard to read the list of proposed staff officers. | 21 |
fomc | 1,996 | Thank you, Mr. Chairman. For: Secretary and Economist, Donald Kohn Deputy Secretary, Normand Bernard Assistant Secretary, Joseph Coyne Assistant Secretary, Gary Gillum General Counsel, Virgil Mattingly Deputy General Counsel, Thomas Baxter Economist, Michael Prell Economist, Edwin Truman Associate Economists from the B... | 142 |
fomc | 1,996 | Would somebody like to move that list? SEVERAL. So move. | 15 |
fomc | 1,996 | Are there any questions or discussion? If not, without objection I declare it official. The next item on the agenda is the selection of a Federal Reserve Bank to execute transactions for the System Open Market Account. Do I have any nominations? | 47 |
fomc | 1,996 | Mr. Chairman, I will nominate the Federal Reserve Bank of New York. | 15 |
fomc | 1,996 | Is there a second? SEVERAL. Second. | 11 |
fomc | 1,996 | Without objection. We also have to select the Manager of the System Open Market Account. Our current incumbent, as you know, is Peter Fisher, and unless I hear objections I will presume that he is required to remain in office unanimously. Thank you. Mr. Fisher, now that you are re-anointed, you may go forward. | 67 |
fomc | 1,996 | Norm, should we go on to the authorizations? | 11 |
fomc | 1,996 | Let's get those out of the way, sorry about that. We need to. Peter can't open his mouth until we review the Authorization for Domestic Open Market Operations, but that clearly is a theoretical issue. You all have received the text of the Authorization and without objection I will assume that it is renewed. We also hav... | 194 |
fomc | 1,996 | Without objection. Secondly, we need reauthorization of the warehousing authority. Would somebody like to move that? SEVERAL. So move. | 29 |
fomc | 1,996 | Without objection. Thank you very much. A document also has been sent out to you with proposed changes to the Program for Security of FOMC Information. The memorandum, I think, was reasonably straightforward. Does anybody wish to make any comments or ask any questions? If not, without objection I will presume that it i... | 101 |
fomc | 1,996 | I move approval. | 4 |
fomc | 1,996 | Without objection. Peter, you have awaited your turn and you may now proceed. | 16 |
fomc | 1,996 | Thank you. [Statement--see Appendix.] | 9 |
fomc | 1,996 | Can you explain why the arbitrage that has been put in place by a number of hedge funds--that is, borrowing yen, converting to dollars, and investing in dollars unhedged--does not total more than the $30 to $50 billion that I hear bandied about? Are those numbers anywhere close to being correct? I find them very low fo... | 107 |
fomc | 1,996 | Right. I have thought of it, and I think the market thinks of it, as two distinct positions. In one, they are long dollars against yen. Secondly, they choose a sector of our yield curve, say the five- to ten-year area, in which to be long. They may have borrowed yen somewhere on their balance sheet as well, given the l... | 186 |
fomc | 1,996 | I am not talking about the U.S. yield curve. I am just saying that it seems attractive to go out and borrow yen at 1/2 percent or whatever, convert the yen to dollars, and invest the proceeds in 5-day U.S. instruments. The exchange rate would have to fall fairly substantially to offset the gains in that sort of play. S... | 89 |
fomc | 1,996 | There are a number of financial intermediaries who manage discreetly where they choose to borrow and the size of their positions. I don't think that is being picked up in what people talk about as the "hedge fund" trades. The traditional investment banks simply look around the world to finance themselves at the lowest ... | 118 |
fomc | 1,996 | Let me ask another question of you and perhaps Ted Truman. Four to six months ago, whenever new data on the total German economy were released, there was a general view that the data were of very poor quality and had to be appraised very cautiously. Do we have any subsequent view of whether or not the data are more rel... | 70 |
fomc | 1,996 | They are still putting out the data with warnings on them and that could continue for some time. They have had a number of changes in their statistical systems incorporating both their going to pan-German data and aligning their statistical systems with the European norms. It is not clear yet what can be interpreted as... | 93 |
fomc | 1,996 | That's better than the central bank! | 7 |
fomc | 1,996 | I thought it was very clever myself. It elimi-nated the difference between the French and the German inflation rates! | 24 |
fomc | 1,996 | Any further questions for Peter? | 6 |
fomc | 1,996 | I want to ask Peter about these sweep accounts. Looking at the aggregate numbers, the introduction of those accounts accelerated markedly in January. Do you have any sense about how far that phenomenon has played out in the banking system? If it continues, what are the longer-term implications with respect to the reser... | 81 |
fomc | 1,996 | I am afraid we all think it can go a good bit further. Beyond that, I don't know if we have anything very scientific to offer you. | 30 |
fomc | 1,996 | You are right, President Melzer. They did accelerate in January and also in December. We keep projecting that the adoption of sweep accounts will simmer down a little, and then another large bank or large bank holding company chain decides to adopt them and the reserves effect grows even faster. I should note that the ... | 183 |
fomc | 1,996 | Further questions for Peter? Peter, did you request ratification of foreign currency transactions as well as your domestic transactions? | 23 |
fomc | 1,996 | I got repaid. You don't mind that I got repaid on the Mexican swap drawings! | 19 |
fomc | 1,996 | We have to approve repayments? | 6 |
fomc | 1,996 | You ratify that I accepted repayment. | 8 |
fomc | 1,996 | Would somebody like to move to ratify Peter's acceptance of the repayment? SPEAKER. So move. | 21 |
fomc | 1,996 | I second that and move a favorable review of the series of dances he briefed us about. [Laughter] | 23 |
fomc | 1,996 | Without objection. Would somebody like to move ratification of the Domestic Desk operations? SPEAKER. So move. | 22 |
fomc | 1,996 | Without objection. Let's now move on to the Chart Show with Messrs. Prell, Slifman, Stockton, and Truman. | 27 |
fomc | 1,996 | Thank you, Mr. Chairman. We will be referring to the material that has been placed in front of you. It's entitled "Material for Staff Presentation to the Federal Open Market Committee." [Statement--see Appendix.] | 43 |
fomc | 1,996 | [Statement--see Appendix.] | 6 |
fomc | 1,996 | [Statement--see Appendix.] | 6 |
fomc | 1,996 | [Statement--see Appendix.] | 6 |
fomc | 1,996 | Thank you very much. Any questions for any of the gentlemen? Mr. Parry. | 18 |
fomc | 1,996 | Mike, I have a question about the weakness in the economy that we are experiencing at the present time. If I look at the quarterly projections in the Greenbook, it would appear that the weakness in the current quarter is temporary and is related to some extent to the weather. If you were to characterize the future quar... | 95 |
fomc | 1,996 | I think I would characterize the growth on average after this quarter as being so close to the trend as not to be perceptibly different. | 27 |
fomc | 1,996 | That's fine. | 3 |
fomc | 1,996 | Our forecast does suggest that the recent weakness is likely to be a transitory phenomenon. In terms of the available information, the weakness has been highly concentrated, in effect, in the manufacturing sector, with producers moving quickly to gear production down in an effort to reduce inventory investment to a mor... | 228 |
fomc | 1,996 | The baseline policy assumptions keep the economy roughly at trend? | 11 |
fomc | 1,996 | That is our judgment. As I have been careful to suggest, we would not say that we have come close to knowing these relationships with such precision that we would want to pinpoint the federal funds rate down to the nearest quarter of a percent. As best we can see at this point, a real funds rate that currently looks a ... | 89 |
fomc | 1,996 | Thank you. | 3 |
fomc | 1,996 | President Broaddus. | 5 |
fomc | 1,996 | Mike, I have just a quick question on the fourth-quarter projection. As you pointed out, total production worker hours are reported to be about the same for the fourth quarter as in the third quarter. I know these data don't move in lock step, but we did get a significantly stronger GDP result in the third quarter than... | 91 |
fomc | 1,996 | Until very close to the end of our projection process, we had to rely very heavily on anecdotal information. Toward the end of the process, we received the PCE estimates for October and November and they are a big chunk of total expenditures. Those estimates did not suggest a very strong PCE contribution, which reinfor... | 205 |
fomc | 1,996 | President Minehan. | 4 |
fomc | 1,996 | All things taken into account, I am struck by your fairly benign forecast when I compare it with some of the rhetoric from a lot of other sources. I also was struck by your comment that if you were going to rely on anecdotal information, you would have written down a lower number. I feel that way also. Yet, when we loo... | 143 |
fomc | 1,996 | It is always dangerous to judge these things by the anecdotal information, though sometimes such information provides an early sign of a development that we can't perceive yet in the data. With the lags we have experienced recently in getting the data, I think we may have to look at those anecdotal reports a little mor... | 141 |
fomc | 1,996 | Permits are not too bad, though. | 9 |
fomc | 1,996 | Permits look a little better. We are hopeful, looking at loan applications and so on, that there is an uptick in train, only temporarily interrupted by all this snow. Looking at the trend in capital goods orders, we have pointed out for some time that there was some moderation in their growth aside from computers. So, ... | 313 |
fomc | 1,996 | Right. | 2 |
fomc | 1,996 | Historically, we have not had recessions with the stock market going up. It would be astonishing if we were to see a much weaker picture without some softening in the stock market. | 38 |
fomc | 1,996 | Mike, you did not mention motor vehicles in January, which is perhaps the weakest of all of these. | 21 |
fomc | 1,996 | The anecdotal reports for that industry are quite weak and certainly tend to offset the report of a spurt in sales in December. But averaging through that, we still would come out with a moderate sales pace that is quite consistent with the trends that have been in place for a while. That does not rule out a downside s... | 69 |
fomc | 1,996 | Any further questions for any of the gentlemen? | 9 |
fomc | 1,996 | I have a question for Dave Stockton relating to Chart 17. It concerns this issue about compensation and labor market tightness. In the middle panel, you make an adjustment that, if I understand the red line correctly, raises the help-wanted advertising index. I would think the implications of that are to deepen the mys... | 108 |
fomc | 1,996 | Indeed it does in some sense. | 7 |
fomc | 1,996 | I understood you to say the reverse. | 8 |
fomc | 1,996 | What I meant to imply was that just looking at the unadjusted help-wanted index, the black line, might have helped to solve the mystery. One might have looked at that and concluded that there are many fewer vacancies at this point in time. | 51 |
fomc | 1,996 | Okay. | 2 |
fomc | 1,996 | Given our view that it probably has become a less reliable indicator, we made the adjustment for the increased use of personnel supply agencies. But you are right; in some sense, the adjustment does not resolve the mystery. The adjusted index is a little below the highs reached in the late 1980s, but not very much. | 66 |
fomc | 1,996 | Right, thank you. | 5 |
fomc | 1,996 | Further questions? | 3 |
fomc | 1,996 | I want to add something on autos; I will be saying more later. We had conversations with one of the Big Three yesterday, and a couple of things came out on the picture for January. One is that they view the sales that they lost due to bad weather as just temporary. They expect to make those up. If somebody is going to ... | 133 |
fomc | 1,996 | Four-wheel drive vehicles no doubt! | 7 |
fomc | 1,996 | No. Sales of light trucks have been strong all along. Obviously, cars sales are the area where there has been real weakness. | 26 |
fomc | 1,996 | It's clear they have made a move to reduce their production this quarter. | 14 |
fomc | 1,996 | Right. | 2 |
fomc | 1,996 | They perceive that their earlier expectations were too rosy. We felt that was true all along, so the shock in terms of our forecast is milder. But it has played a role in our perception that this is going to be a pretty weak quarter. | 50 |
fomc | 1,996 | Further questions? If not, who would like to start our roundtable? President Jordan. | 18 |
fomc | 1,996 | First of all, our District has a very large facility that has recently been added to our idle capacity and will stay idle for a long time--the Cleveland Browns' stadium. [Laughter] I think Mike Prell made a remark that it was a bad January. It's always a bad January in my District. [Laughter] | 67 |
fomc | 1,996 | It is unusual to have it here in Washington. | 10 |
fomc | 1,996 | In December, the Chairman remarked that the economy had the feel of a car that had its hand brake on. I think the economy not only has the hand brake on, but it has a flat tire. We may be talking about a 12-wheeler, not an 18-wheeler, at this table, but I know one of those tires is flat. We hear from large truck supply... | 916 |
fomc | 1,996 | Governor Lindsey. | 3 |
fomc | 1,996 | Thank you, Mr. Chairman. I wanted to talk about Cathy Minehan's perception of why people feel so grumpy and to do so in the context of the staff's Chart Show presentation. Larry Slifman very generously provided charts 11 and 12 a little early today, so I had a chance to look at them and at some of the data behind them.... | 1,183 |
fomc | 1,996 | I would like to ask one question of Mike Prell or Dave Stockton or Larry Lindsey--whoever knows the answer. The directly held corporate equities to which Governor Lindsey has been referring include both closely-held small corporations and publicly marketable corporations. The equity that is available in the first case ... | 87 |
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