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fomc | 1,996 | Let's ask the Secretary of this Committee what is appropriate. | 11 |
fomc | 1,996 | This would be adding a reference to the discount rate at the end of the first sentence that would read, "taking account of a possible reduction in the discount rate." | 33 |
fomc | 1,996 | I think we have done that before when this situation has arisen. | 13 |
fomc | 1,996 | We have? | 3 |
fomc | 1,996 | Yes. | 2 |
fomc | 1,996 | Okay, then do so. | 6 |
fomc | 1,996 | I will be reading from page 24 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, taking account of a possible reduction in the discount rate. In the context of the Committee's long-run objectives for... | 121 |
fomc | 1,996 | Would you call the roll. | 6 |
fomc | 1,996 | Chairman Greenspan Yes Vice Chairman McDonough Yes President Boehne Yes President Jordan Yes Governor Kelley Yes Governor Lindsey Yes President McTeer Yes Governor Phillips Yes President Stern Yes Governor Yellen Yes | 40 |
fomc | 1,996 | You have until February 7th to submit to Mike Prell any changes you would like in your Humphrey-Hawkins forecasts. Our next meeting is March-- | 33 |
fomc | 1,996 | 26th. | 3 |
fomc | 1,996 | 26th. Luncheon is at 12:30? | 12 |
fomc | 1,996 | 12:30. | 4 |
fomc | 1,996 | That will be in Dining Room E. | 8 |
fomc | 1,996 | Mr. Chairman, I had a question. Are you going to share with us the press statement that you will be making? | 25 |
fomc | 1,996 | I am sorry, yes. Good for you. The relevant paragraph would read: "Moderating economic expansion in recent months has reduced potential inflationary pressures going forward. With price and cost trends already subdued, a slight easing of monetary policy is consistent with contained inflation and sustainable growth." Tha... | 65 |
fomc | 1,996 | Do you care about consistency with the Greenbook forecast with respect to inflation? | 15 |
fomc | 1,996 | The Greenbook forecast is a forecast of the staff. | 11 |
fomc | 1,996 | I understand. | 3 |
fomc | 1,996 | The Federal Open Market Committee listens to the staff with great reverence, [Laughter] but it then makes its decision. | 25 |
fomc | 1,996 | How about the forecasts of the FOMC members? | 11 |
fomc | 1,996 | The FOMC members' forecasts are estimates of the most likely outcome. Policy is based on the most likely outcome conditioned by a distribution of probabilities. If somebody could guarantee that outcome, I would say that insurance is unnecessary at this stage. I would think that implicit in our decision is the understan... | 84 |
fomc | 1,996 | So one can accept the forecast, but it's an insurance policy? | 13 |
fomc | 1,996 | Yes. In other words, I find the forecast not an unreasonable maximum likelihood forecast. That is a factor that is relevant to one's view of the world, but it does not determine what the appropriate policy stance should be. | 44 |
fomc | 1,996 | People may change their forecast? | 6 |
fomc | 1,996 | Sure. Some of them might. I know one who will. [Laughter] | 17 |
fomc | 1,996 | Mr. Chairman, a reminder: Under our usual procedures our announcement will be made at approximately 2:15 p.m. Particularly since there will be a luncheon before then, we have to be very careful not to allow any inadvertent word of today's policy decision to get out before the announcement. Peter Fisher pointed out to m... | 128 |
fomc | 1,996 | What's the time of the release? | 7 |
fomc | 1,996 | 2:15 p.m. | 6 |
fomc | 1,996 | Why don't we do it right now? | 8 |
fomc | 1,996 | Why does it have to be at 2:15 p.m.? | 14 |
fomc | 1,996 | The Committee would need to make some changes. I think in the past the Committee has wondered whether it wanted to have the market sitting there for hours wondering exactly what time the Committee meeting would be over and speculating, in the event of a delayed release, whether something unusual might be going on. Ther... | 78 |
fomc | 1,996 | If we can't trust ourselves for 2 hours and 15 minutes, we have the wrong people in this room! | 23 |
fomc | 1,996 | You have been eloquent all day, but that was your finest comment! | 15 |
fomc | 1,996 | Good morning, everybody. Some of us are slightly blurry-eyed, which is understandable. I appreciate your coming somewhat earlier. Would somebody like to move the minutes of the January 30-31 meeting? | 40 |
fomc | 1,996 | Move approval. | 3 |
fomc | 1,996 | Without objection. Mr. Fisher. | 7 |
fomc | 1,996 | Thank you. [Statement--see Appendix.] | 9 |
fomc | 1,996 | Questions for Peter? If not, would somebody like to move to ratify his transactions since the last meeting? | 22 |
fomc | 1,996 | I move approval of the domestic operations. | 8 |
fomc | 1,996 | Second. | 2 |
fomc | 1,996 | Without objection, thank you. Mr. Prell. | 11 |
fomc | 1,996 | Thank you, Mr. Chairman. [Statement--see Appendix.] | 13 |
fomc | 1,996 | With respect to your last remark, has the decline in cattle prices been, as best you can judge, essentially a reaction to the increased feed costs that have crushed margins or is there a broader cattle supply cycle involved here? Do we know the answer to that? | 52 |
fomc | 1,996 | I take it you are not referring to yesterday's-- | 11 |
fomc | 1,996 | No, I am referring to the fact that cattle prices have been falling in the face of rapidly rising corn and soybean meal costs, for example, and ranch margins have been coming down quite appreciably. The question I am trying to get at is whether the weakness in cattle prices is the result of premature unloading of herds... | 80 |
fomc | 1,996 | I don't have a good answer. My sense is that a reduction in herd size probably has not begun in any significant way. That remains one of the uncertainties. It could be that the markets anticipate that such a development will occur in the not too distant future. | 52 |
fomc | 1,996 | So a pickup in meat prices, should it occur, is still quite some time away? | 18 |
fomc | 1,996 | Yes. We see that as more of a risk as we move out into 1997. | 19 |
fomc | 1,996 | Mr. Chairman, I think that is accurate. We think the depletion of herd inventories has just begun, at most, and meat prices probably reflect that expectation in the context of rising grain costs. The dominant factor is a strong supply of red meat that has not been liquidated yet. | 57 |
fomc | 1,996 | Do you have any mad cows in your District? | 10 |
fomc | 1,996 | A lot of mad ranchers, but no mad cows! [Laughter] | 16 |
fomc | 1,996 | President Parry. | 4 |
fomc | 1,996 | Mike, you talked a little about PCs, and the Greenbook indicated that in recent history we have all underestimated the amount of investment in that area. I also saw The Wall Street Journal article on Monday. Is your reasoning as to why such investment is going to be weaker in the future similar to that in the article, ... | 76 |
fomc | 1,996 | The article did echo a couple of the reasons that we stated in the Greenbook. Admittedly, we stated those reasons only very briefly. | 28 |
fomc | 1,996 | Yes. | 2 |
fomc | 1,996 | One was the remark about replacement demand. I certainly have heard this from people in the industry. They feel that in many cases businesses have acquired about all the computers they need. The question is how fast they are going to replace those computers, given the changes in technology. That was a central theme of ... | 266 |
fomc | 1,996 | Thank you. | 3 |
fomc | 1,996 | President Jordan. | 3 |
fomc | 1,996 | Mike, when you first gave us the projections for 1997 in the September Greenbook, the nominal GDP growth in that initial projection was a very hopeful path to me because it had nominal GDP growing just under 4 percent for the full year. That seemed about right to me. But in this Greenbook, your upward revision of nomin... | 185 |
fomc | 1,996 | President Jordan, that's a good question. I do not have a ready answer for you. Obviously, the deflator has shifted more than the other price indexes. | 32 |
fomc | 1,996 | By a full percentage point. | 6 |
fomc | 1,996 | That suggests an element of mix change here. It is conceivable that, on further investigation, we shall find that there is something we are not entirely comfortable with in these numbers. So, I shall take that question as something for us to investigate before the next round. | 53 |
fomc | 1,996 | This does not answer the question either, but one of the reasons why the deflator is higher now than it was back in September is the shift to the updated base year. That has the effect of tending to raise the deflator and to lower GDP growth. That does not explain why nominal GDP is a percentage point higher than it wa... | 83 |
fomc | 1,996 | I should have noted that. Because the nominal GDP is higher, there is a bit of a mystery here for us. | 24 |
fomc | 1,996 | I'm glad Jerry pointed that out. When you construct the forecast, do you start with the nominal GDP forecast and work back? | 25 |
fomc | 1,996 | No, but in the course of a forecast where one needs to align both the income and the product sides of the accounts, the nominal totals are relevant. We should not end up with numbers that don't make sense. | 43 |
fomc | 1,996 | Right. I am fairly startled at your answer. That is why I am asking the question as to how the nominal falls out. I would think that you would start with a monetary policy forecast that would determine a nominal GDP--Don is shaking his head, so I have it wrong. Tell me exactly. | 61 |
fomc | 1,996 | It is a simultaneously determined system. | 7 |
fomc | 1,996 | But you have a full percentage point change in nominal GDP-- | 12 |
fomc | 1,996 | It means that somebody's "add factor" changed very substantially. | 13 |
fomc | 1,996 | Well, all right, this burst of nominal GDP was the way of reconciling things that did not add up in the model. | 27 |
fomc | 1,996 | Let me remind you that the observation was about a forecast made last September. That September forecast was put together prior to a total revision of the national income accounts. Some of those revisions did affect nominal GDP going back historically. I don't want to go too far here. I am not certain. | 58 |
fomc | 1,996 | But they did. There were significant changes in nominal GDP. | 12 |
fomc | 1,996 | Right. But the fact is that the largest change in these nominal GDP forecasts for 1997 was between September and November. There has been a further upward creep that accumulates to a significant difference from September to now. But if one looked at the changes just over the past couple of months, one would see a prett... | 126 |
fomc | 1,996 | Any further questions? | 4 |
fomc | 1,996 | Can I just follow up on that as regards further work? Mike, had you said in response to my initial question that you had been assuming a monetary policy indexed by a 6 percent funds rate --or, I guess, it was 5-3/4 percent at that time--and that the 1/2 percentage point drop since then is what did it, then we could hav... | 182 |
fomc | 1,996 | You are getting into a fundamental question about the whole forecast, and I am focusing more on the fact that, in particular, our consumer price forecast looking out into 1997 did not change a great deal. Our real GDP forecast has not changed much either, but we have switched from 1987 dollars to chain-indexed 1992 dol... | 182 |
fomc | 1,996 | Any further questions? If not, would somebody like to start the roundtable? President Parry. | 20 |
fomc | 1,996 | Mr. Chairman, economic growth in the Twelfth District has picked up after a brief lull at the end of last year. Over the past 12 months, growth in the District has been substantially more rapid than in the nation according to recently revised employment figures. The increased pace of activity largely reflects a pickup ... | 626 |
fomc | 1,996 | Thank you. President Broaddus. | 8 |
fomc | 1,996 | Mr. Chairman, the information we are getting from our regional contacts has been decidedly more upbeat in recent weeks. Both our latest District manufacturing survey and our retail service sector survey showed broad-based increases in activity for the first time in about five months. Some of this news obviously reflect... | 826 |
fomc | 1,996 | President Boehne. | 5 |
fomc | 1,996 | Thank you, Mr. Chairman. What is remarkable about the economy in recent months is its resiliency. Despite government shutdowns, severe weather, and strikes, the national economy is still on track for moderate growth and low inflation. The economy is also experiencing what could turn out to be its greatest restructuring... | 567 |
fomc | 1,996 | President Hoenig. | 4 |
fomc | 1,996 | Mr. Chairman, the economy in the Kansas City District continues to grow at a fairly strong pace, with recent developments pointing to greater strength now than I reported at the last meeting. Recent revisions to our state employment statistics showed stronger job gains in the Tenth District in 1995 than previously thou... | 407 |
fomc | 1,996 | President McTeer. | 5 |
fomc | 1,996 | For the most part, the Eleventh District's economy is showing reasonably healthy overall growth, but as always there are a few pockets of weakness. In the last ten days, we have met with our board of directors, our Financial Institutions Advisory Council, and our Small Business and Agriculture Advisory Council. The mes... | 548 |
fomc | 1,996 | President Minehan. | 4 |
fomc | 1,996 | Mr. Chairman, the New England economy is looking more and more like the national economy, even better in a couple of respects. The small revision in how we are looking at things comes about as a result of changes in the benchmarks for payroll data, which other people have commented on. The changes have shown New Englan... | 907 |
fomc | 1,996 | President Moskow. | 4 |
fomc | 1,996 | Mr. Chairman, economic activity in the Midwest remains at high levels, with some sectors relatively strong and others showing signs of moderate weakening. In general, housing and retail sales continue to perform well; manufacturing is growing slowly; and labor markets remain tight. A major concern has been the Dayton b... | 1,136 |
fomc | 1,996 | President Guynn. | 4 |
fomc | 1,996 | Thank you, Mr. Chairman. Looking through the anomalies of the last several months, it appears to us that the Sixth District continues to grow at a moderate pace. The bad weather is likely simply to have increased the amplitude of the seasonal pattern in activity rather than to have exerted some lasting effect on overal... | 864 |
fomc | 1,996 | President Stern. | 3 |
fomc | 1,996 | Thank you, Mr. Chairman. Our District economy has outperformed the national economy for a number of years, but I do not have the impression that that is continuing. If anything, District growth certainly has been less than that of the national economy in recent months. The principal areas of concern are the manufacturi... | 336 |
fomc | 1,996 | President Melzer. | 4 |
fomc | 1,996 | Thanks, Alan. The Eighth District economy continues to expand. A few contacts noted some softening at the beginning of the year, but many expect a pickup as we move into the second quarter. Unemployment rates in District states tended to jump early in the year for weather-related reasons, but Missouri was a notable exc... | 751 |
fomc | 1,996 | Vice Chairman. | 3 |
fomc | 1,996 | Thank you, Mr. Chairman. The economy of the Second District continues to underperform the nation as it lumbers along on its slow growth path. Recently, retail contacts reported that February sales rebounded to plan levels following the very disappointing January and the record blizzard. Senior loan officers at small- a... | 549 |
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