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fomc | 1,978 | I think this is an improvement in language, but I don't think it necessarily will get you out of the PR problem that these 2-month ranges have caused--and it has been [going on] for a long time. I think there's a lot to be said for the Committee moving away from this 2-month structure, and I want to compliment the Phil... | 138 |
fomc | 1,978 | Yes, I think you're right, Frank. I think there has to be another session to address this issue in depth. We may or may not solve it. But I think an interim step to play it in a different way can be constructive. | 49 |
fomc | 1,978 | Mr. Chairman. | 4 |
fomc | 1,978 | Yes. | 2 |
fomc | 1,978 | Would it be in order to make one other suggestion? | 11 |
fomc | 1,978 | Surely, all kinds of [suggestions are welcome] or we can even drop the whole idea. | 21 |
fomc | 1,978 | No sir, I think the idea is excellent. I wonder whether you would consider one other minor change, and that is in that same paragraph--the second paragraph on page 1, line 5--putting in before the words "during the period" these words: "In view of the recent growth of monetary aggregates with respect to the proposed lo... | 201 |
fomc | 1,978 | Let me read that. In view of the recent growth of monetary aggregates in relation to-- | 18 |
fomc | 1,978 | With respect to or in relation to-- | 8 |
fomc | 1,978 | Well, let's say "in relation to" the longer-run ranges. See, then you tie in the prior [sentence]. That's our objective. Then we say in view of the growth in relation to such longer-run... | 44 |
fomc | 1,978 | I don't understand the purpose of this addition, Mr. Chairman. | 13 |
fomc | 1,978 | The significance of the sentence-- | 6 |
fomc | 1,978 | The first sentence of the paragraph says that. | 9 |
fomc | 1,978 | The significance of it is to clarify in the public's mind how the short-term fed funds targets relate to our attempt to achieve the longer-term monetary aggregate targets. | 32 |
fomc | 1,978 | That's what the first sentence says. | 7 |
fomc | 1,978 | That's why I asked you the second time. | 9 |
fomc | 1,978 | Yes, Bob. | 4 |
fomc | 1,978 | These are all good ideas, but we're getting into the position of the Committee writing the directive. I would like to [suggest that we] refer this to the Subcommittee on the Directive to combine with their discussion of a quarterly or whatever it is on the 2-month [issue] and to come back with a recommendation. I think... | 113 |
fomc | 1,978 | I would support that. | 5 |
fomc | 1,978 | I would also. | 4 |
fomc | 1,978 | Larry, I think the question is addressed on page 2 of the draft on line 27--if you get the formal [version] of the revised draft. It says "M1, which had grown moderately in the first quarter, rose sharply in April." Therefore, I think that read with the subsequent paragraph in the directive will address the point which... | 75 |
fomc | 1,978 | I don't feel strongly about it; I think what you are doing here is excellent. | 17 |
fomc | 1,978 | Well, I might say, Mr. Chairman, as the Chairman of the Subcommittee on the Directive, that I don't think the proposal that you made--with the modest word amendments that I suggested--represents a change in policy or in the prescription for policy and, therefore, I don't think it needs to be referred to the Subcommitte... | 128 |
fomc | 1,978 | I'm a little worried about that one. Right at this point when you are going to [see] some intermediation-- | 25 |
fomc | 1,978 | But as far as your-- | 6 |
fomc | 1,978 | My original proposal was merely to shift wording to explain what we are doing, rather than change policy. While I tend to like Phil Coldwell's suggestion, I think I agree with you that we are getting into substance and it probably shouldn't be done. But I'm also willing to leave everything the way it is and let you con... | 71 |
fomc | 1,978 | May I make one--I hope modest--proposal of substance? It has nothing to do with what we are now talking about but I see that the directive has in it "including conditions in foreign exchange markets." We put that in rather explicitly in either December or January because we were particularly worried about the foreign e... | 67 |
fomc | 1,978 | Why don't we take it out? | 7 |
fomc | 1,978 | I might want to put it back in next month. I don't think it's all that-- | 18 |
fomc | 1,978 | I think this is a code word now for one thing to support another. | 15 |
fomc | 1,978 | I think it's wrong when it's not actively influencing the direction of what we are doing. | 17 |
fomc | 1,978 | And you are pretty sure you won't want it [in again] before a month has passed? | 19 |
fomc | 1,978 | I hope not. Bob. | 6 |
fomc | 1,978 | I do have one technical point--and I hate to prolong this--but it says here that the Manager shall be guided mainly by the relationship between the latest estimates of the aggregates M1 and M2 and "the following ranges..." But when we use a money market directive we have a different trigger point. When we have a moneta... | 162 |
fomc | 1,978 | Which is the appropriate one? | 6 |
fomc | 1,978 | Well, if you use an aggregates directive it would be the midpoints of the [following] ranges, and if you use a money market it would be the upper and lower limits. | 37 |
fomc | 1,978 | Mr. Chairman I think that-- | 7 |
fomc | 1,978 | It's not totally agreed on. | 6 |
fomc | 1,978 | That affects the interpretations of policy, I think. For example, when the Committee adopted the 3 to 8 percent range, it was not clear to me from the discussion that they wanted to lower the midpoint or whether they were just saying that you don't worry too much if [growth hits the low] end and worry more when it gets... | 123 |
fomc | 1,978 | Yes, I would criticize our earlier discussion for that ambiguity, Steve. I thought that was one issue we didn't settle, and that's one reason why Chuck and I see it so differently on the appropriate ranges. I see a different trigger point than he does. | 51 |
fomc | 1,978 | Roger. | 2 |
fomc | 1,978 | Mr. Chairman, as a non-voting member, I would like to protest the exercise we have gone through around this table. The lateness of the time of receiving your memorandum hasn't given me an opportunity to read it and think it through and yet we are amending that language here at the table. It's very difficult to follow a... | 143 |
fomc | 1,978 | Mark. | 2 |
fomc | 1,978 | I was going to say almost the same thing. I feel uncomfortable because it's not clear to me whether we are just changing words or changing policy, and I'd like more time to think about it. | 39 |
fomc | 1,978 | I feel the same way. | 6 |
fomc | 1,978 | Is there a general consensus on that viewpoint? We have no reason to rush this. The issue is still with us. | 24 |
fomc | 1,978 | I think we need to clear it up, but I don't think it has to be done today. | 20 |
fomc | 1,978 | No. There's no reason [to rush]. I think we need to address the point that we continue to use the word "expects." I even think we ought to consider taking that out of the directive if we do nothing else. | 46 |
fomc | 1,978 | That's the one word that jumped out at me in the directive. Sometimes we deliberately put the ranges at a place we don't expect. | 26 |
fomc | 1,978 | Let's look then at [that language]. I gathered from the conversation that everyone would like a monetary aggregates formulation. Let's look on page 3, which has the operating paragraph, which is what we are talking about. "The Committee seeks to encourage near-term rates of growth in M1 and M2 on a path believed to be ... | 107 |
fomc | 1,978 | You could say the ranges of tolerance of the annual growth rates. Picking up Chuck's words for the aggregates, "the ranges of tolerance for the annual growth rates of the May-June period would be 3 to 8 and 4 to 9..." | 52 |
fomc | 1,978 | The ranges of tolerance, okay. And then "In the judgment of the Committee such growth rates are likely to be associated with a weekly-average federal funds rate slightly above the current level. If, giving approximately equal weight to M1 and M2, it appears that the growth rates will deviate significantly from the midp... | 86 |
fomc | 1,978 | That's the formulation with a monetary aggregates [directive]. | 10 |
fomc | 1,978 | I think that wording can be interpreted asymmetrically, if the Committee wishes. | 16 |
fomc | 1,978 | Significantly. | 4 |
fomc | 1,978 | Or sensitive to up or down. | 7 |
fomc | 1,978 | All right. [The rest of that sentence reads "...the operational] objective for the federal funds rate shall be modified in an orderly fashion within a range of 7-1/4 to 7-3/4 percent." Any other changes? | 50 |
fomc | 1,978 | I hope we are not understanding a change of policy here on this. Midpoints are midpoints. And they do trigger a change if [the aggregates] move above them. | 35 |
fomc | 1,978 | That's not really the intention that I think was implied today. We treated the ranges as trigger points and not as a defining midpoint. | 26 |
fomc | 1,978 | Meaning you're waiting until you get to the peak--to the ceiling--before you change? | 18 |
fomc | 1,978 | You move gradually. | 4 |
fomc | 1,978 | I was asking if the Committee is more sensitive to moving above the midpoint rather than [below]. | 19 |
fomc | 1,978 | No question about that. | 5 |
fomc | 1,978 | So I think so we can live with this. Any other changes? | 14 |
fomc | 1,978 | We have 30 days, don't we? | 9 |
fomc | 1,978 | Yes. All right, I suspect at this point that we should ask your blessing on the directive. Is there any dissent from it as we have outlined it? Oh, Mark. All right. [Next on the agenda is] the Federal agency issues, which I think can be deferred. Our next meeting is Tuesday, June 20. And we can now adjourn. I thank you... | 93 |
fomc | 1,978 | Has a letter been sent to Congress? | 8 |
fomc | 1,978 | Yes. | 2 |
fomc | 1,978 | We do have a busy day and I am going to once again ask your cooperation in trying to stick to the subject matter and I=ll try to do the same. Before we begin, I want to call to your attention a letter I received from Chairman Henry Reuss about the possibility of raising the long-run ranges for the monetary aggregates. ... | 261 |
fomc | 1,978 | There=s another problem, Mr. Chairman, and that is that there is a cyclical variation in the relationship of M1 to M2 and our present range structure reflects the kind of relationship that you typically get in an easier money period. As money tightens, the rates of growth of M1 and M2 tend to come together and we have ... | 106 |
fomc | 1,978 | Yes. Any thoughts along these lines, if you=d like to share them with us before the next meeting, would be appreciated because I think it is going to be a tricky time for the establishment of these ranges. The first order of official business is to approve the minutes of the actions taken at our FOMC meeting on May 16.... | 142 |
fomc | 1,978 | [Statement--see Appendix.] | 6 |
fomc | 1,978 | And the attitude is different [depending on] which way you are going. Would you repeat [the figure] so that we all have it for the total amount of purchases of marks--Treasury and Federal Reserve--for the period? | 47 |
fomc | 1,978 | $879 million. | 4 |
fomc | 1,978 | Dollars? | 3 |
fomc | 1,978 | Dollars. | 3 |
fomc | 1,978 | Thank you. Any questions, comments? | 8 |
fomc | 1,978 | We ought to commend the Desk for a very good job. | 12 |
fomc | 1,978 | Well, we don=t know. Compared with what? You=re just impressed with the numbers; you=re not impressed with [unintelligible] they=ve done a good job. Henry. | 40 |
fomc | 1,978 | Scott, how is the program going--that we buy moderately but as regularly as we can? | 19 |
fomc | 1,978 | That=s why I stressed that we bought $200 million worth of marks in the market and that we=ve acquired over $100 million worth of marks through our agency, the BIS, or the Bank of England on days in which the dollar was steady or firming in the European market. | 58 |
fomc | 1,978 | What percentage of days would that be, approximately, in this last period? | 15 |
fomc | 1,978 | We=ve been in a period in which the dollar has been declining on more days that it was rising so I think it was maybe five, six, seven days--or a quarter to a third of the days. | 44 |
fomc | 1,978 | Our next action is to ratify the transactions in foreign currency operations since the previous meeting. Is there any dissent from that action? Then we will consider that action approved. [Next is] consideration of the Manager=s recommendations with respect to foreign currency operations. Alan. | 53 |
fomc | 1,978 | Mr. Chairman, as Scott has noted, we have made good progress in repaying our System D-mark debt, particularly the drawings of the earliest maturities--those drawings [totaling] about $800 million that we incurred last October, November, and December. They have all been repaid. We are now working against the drawings in... | 481 |
fomc | 1,978 | Thank you, Alan. You have recommended two actions. One is to approve the renewals of drawings with July maturities and the second is to reduce the [limit on the] open position [in paragraph 1D] of the authorization to $1.5 million. Any questions or comments? Any dissent from those actions? Hearing none, we will approve... | 164 |
fomc | 1,978 | I think we might go to the revisions, Mr. Chairman. | 13 |
fomc | 1,978 | I think you all have Attachment A, a strike-through [version that shows the] changes that are recommended. | 22 |
fomc | 1,978 | I can summarize. | 4 |
fomc | 1,978 | Would you please? | 4 |
fomc | 1,978 | We are [proposing] essentially six things. First, as you know, we want to get rid of the gross transactions limit, which has proved cumbersome in active trading. There is a reason for it, namely that the limitation on the Manager of not being able to change the overall open position by more than $100 million a day and ... | 553 |
fomc | 1,978 | The proposal is that it be net. | 8 |
fomc | 1,978 | The proposal is that it be on the net position. The overall open [position] is the major risk measure and the net is in a single currency, taking account of sign--either way. In other words, plus is not the same as minus but on the open [position] plus is the same as minus. We=ve also sent you a set of papers on disord... | 178 |
fomc | 1,978 | Thank you. The action that is being requested is the approval of the amended procedural instructions, [shown in] Attachment A, and the amended paragraph 1D of the Foreign Currency Authorization in Attachment B. Are there any questions? Comments? | 48 |
fomc | 1,978 | I wonder if the Manager has any comments on these proposals. | 12 |
fomc | 1,978 | Alan, do you have any comments on these proposals for change? | 13 |
fomc | 1,978 | Well, Mr. Chairman, I never have felt the need for written procedural instructions because I felt there was a joint understanding between the Committee and the Desk about how we did things. But I have no objections to what I hear. I do find some slight problem with the fact that the overall net limits of $100 million a... | 140 |
fomc | 1,978 | I was wondering particularly, Alan, about [what seems to be] rather a term of art in subsection C, any operation that might generate a "substantial" volume of trading in a particular currency. | 41 |
fomc | 1,978 | This is something that we would normally report all the time, whenever it happens. This is the language that I think Scott himself had suggested and it=s nothing that would bother us. | 36 |
fomc | 1,978 | Scott, did you have any comment? | 8 |
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