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fomc | 1,996 | Governor Meyer. | 3 |
fomc | 1,996 | Mr. Chairman, I also support your recommendation that we make no change in policy at this meeting and retain an asymmetric directive. This position reflects my willingness to support trend growth at full employment with stable modest inflation in the near term, patiently awaiting opportunity down the road for renewed p... | 237 |
fomc | 1,996 | President Moskow. | 4 |
fomc | 1,996 | Mr. Chairman, I support your recommendation for a "B" asymmetric directive, but as I mentioned in my comments, I am concerned about the labor cost pressures exceeding productivity. I also am concerned about the potential for allowing some upcreep in inflation to be built into the economy late this year and in 1997. Of ... | 81 |
fomc | 1,996 | Would you, Mr. Secretary, read "B" asymmetric. | 13 |
fomc | 1,996 | The wording is on page 13 of the Bluebook: "In the implementation of policy for the immediate future, the Committee seeks to maintain the existing degree of pressure on reserve positions. In the context of the Committee's long-run objectives for price stability and sustainable economic growth, and giving careful consid... | 109 |
fomc | 1,996 | Call the roll. | 4 |
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 Meyer Yes Governor Phillips Yes Governor Rivlin Yes President Stern No Governor Yellen Yes | 47 |
fomc | 1,996 | Thank you. The next meeting is Tuesday, September 24th. | 14 |
fomc | 1,996 | Can I make one correction? Earlier in our discussion, I asked Don Kohn and Peter Fisher to come forward with the reverse repo recommendation in September. Actually, it makes more sense to do it in November. | 42 |
fomc | 1,996 | So be it. We adjourn for lunch. | 11 |
fomc | 1,996 | Would somebody like to move approval of the minutes? Bob, I know the San Francisco District is three hours behind us, but I think you are going to have to move their approval. | 37 |
fomc | 1,996 | I would like to move! [Laughter] | 10 |
fomc | 1,996 | Without objection, the minutes are approved. Peter Fisher. | 11 |
fomc | 1,996 | [Statement--see Appendix.] | 6 |
fomc | 1,996 | Thank you. Questions for Peter? Governor Lindsey. | 10 |
fomc | 1,996 | Concerning the French budget, it appears that the French got from here to there with asset sales. Of course, the budget is a very flexible document, but one would think that asset sales would be a little suspect by the terms of Maastrict. Why is the European Monetary Union going to bless this? | 62 |
fomc | 1,996 | It remains an issue under Maastrict, and I think the answer is politics. It's not settled yet, but it appears to be headed that way. | 31 |
fomc | 1,996 | To put the market's reaction in a nutshell, I think the market is focusing on the question of whether the politicians can pull a rabbit out of the hat. Maybe they can. Having a commission in Brussels bless the French budget is one aspect of how the politicians may be able to do that. The markets are not going to undere... | 121 |
fomc | 1,996 | So, the markets are saying that the triumph of politics over economics is a good thing? | 18 |
fomc | 1,996 | In the short run, it may work that way. The market practitioners are concerned that they could lose a lot of money if they underestimate the politics. | 30 |
fomc | 1,996 | The real question is the outlook for the EMU. If one thinks the EMU is going to fail, one would expect the deutsche mark to rally very sharply. If one expects the EMU to hold together, for whatever reason--all the countries may be running 5 percent deficits but they may still decide to come together--that means the deu... | 162 |
fomc | 1,996 | The question, Governor Lindsey, is whether we are talking about high politics or grass root politics and that is another source of uncertainty. The high politics may bring it about. The question is whether the grass root politics will follow the high politics. | 48 |
fomc | 1,996 | Vice Chairman. | 3 |
fomc | 1,996 | I believe also that there are a couple of recent events that make one rather more inclined to think that the politicians are taking a fairly sensible line. The last time we were together, there was a real question by most observers as to whether the leading countries would allow the Maastrict criteria to be fiddled. Yo... | 271 |
fomc | 1,996 | It is, but if you take an asset sale that is one-half percent of GDP and consider that appropriate, the fudging potential involved in the stability pact is quite considerable. So, a lot of future relationships are at stake. I agree that these last two events imply that EMU is going to happen. The question is about some... | 141 |
fomc | 1,996 | Yes, it raises questions. However, before these recent developments, the overwhelming expectation was that if EMU happened, it would be followed by something that simply would not work. The whole notion of trying to use monetary unity to create political unity has never succeeded anywhere. Now, it looks as if they are ... | 80 |
fomc | 1,996 | They are cutting down the sharp edges of the adjustment costs. Governor Rivlin. | 16 |
fomc | 1,996 | Just based on our own experience, I suspect they will have long wrangles in the context of the stability pact about what counts and what does not. It isn't until you have budget sanctions that you even have to face up to those questions. It is possible that European markets are simply not very sophisticated about budge... | 81 |
fomc | 1,996 | Budget accounting basically. RIVLIN. Yes. We have worried about this for a while, but they have not. | 24 |
fomc | 1,996 | That is a very good point. | 7 |
fomc | 1,996 | Even with our fairly specific unified budget principles, there is an awful lot of fudging that goes on in the process. | 24 |
fomc | 1,996 | We had to make rules about asset sales. | 9 |
fomc | 1,996 | Any further questions? | 4 |
fomc | 1,996 | What is involved in the French budget is not actually an asset sale, but a somewhat complicated takeover of pension obligations in return for cash. It is a kind of asset sale. Economists would call it an asset sale; I'm not sure accountants would. | 50 |
fomc | 1,996 | We call it an asset sale. [Laughter] | 11 |
fomc | 1,996 | It is an asset sale a la francaise! [Laughter] | 14 |
fomc | 1,996 | Any further questions? If not, would someone like to move for a vote to approve the domestic operations? | 21 |
fomc | 1,996 | I move their approval. | 5 |
fomc | 1,996 | Thank you. Without objection. Mr. Prell. | 11 |
fomc | 1,996 | [Statement--see Appendix.] | 6 |
fomc | 1,996 | Any questions? President Parry. | 7 |
fomc | 1,996 | Mike, the information coming from the employment data may be somewhat clearer than you have suggested in the sense that, while admittedly the unemployment rate number is questionable and the labor force has been very volatile with large declines, the nonfarm payroll message is very consistently strong and seems fairly ... | 174 |
fomc | 1,996 | I don't think I can comment very productively on your point about what future revisions may show. We do not have a basis for a judgment about whether the allowances that the BLS makes in blowing up their samples for new firms and other statistical problems are on target this time or not. To be sure, there have been siz... | 251 |
fomc | 1,996 | Any further questions? If not, would somebody like to start the roundtable? President McTeer. | 21 |
fomc | 1,996 | Economic growth in the Eleventh District has continued to run a little faster than the national average. In recent months, we have benefited from higher energy prices, the rebound in the Mexican economy, and strong warehouse construction activity following the deregulation of trucking. The Texas rig count has risen 22 ... | 524 |
fomc | 1,996 | President Jordan. | 3 |
fomc | 1,996 | Thank you. I first want to comment on Bob Parry's point about the nonfarm payroll numbers because those revisions go in both directions as we have seen. Currently, the BLS is using a plug of 140,000 per month for jobs created in new business startups. In 1990, they were using 80,000 per month. They subsequently decided... | 1,396 |
fomc | 1,996 | President Broaddus. | 5 |
fomc | 1,996 | Economic activity in our District has continued to expand at a reasonably steady pace over the period since our last meeting. There does appear to have been some moderation in the rate of growth of household spending and also in residential construction activity in some parts of our region from their very strong pace i... | 693 |
fomc | 1,996 | Mr. Guynn. | 5 |
fomc | 1,996 | Thank you, Mr. Chairman. In my view, the recent economic data and anecdotal information show an economy that is operating at a healthy pace. In fact, coming off a surprisingly strong second quarter, GDP growth is averaging just under 3 percent on a year-over-year basis and is exceeding my earlier expectations. As other... | 802 |
fomc | 1,996 | President Minehan. | 4 |
fomc | 1,996 | Mr. Chairman, overall economic conditions in New England remain good. In particular, the regional unemployment rate in August was a full percentage point below the national rate. Initial unemployment claims have been falling and are approaching levels last seen in the 1980s. In thinking about this, we had a discussion ... | 1,020 |
fomc | 1,996 | Why don't you hire some decent help? [Laughter] | 12 |
fomc | 1,996 | President Moskow. | 4 |
fomc | 1,996 | Mr. Chairman, economic conditions in the Seventh District are quite similar to what I reported last time. Our regional economy is still operating at a very high level. The pace of the expansion has slowed somewhat from the first half of the year, but by less than had been expected. The housing sector has held up remark... | 1,112 |
fomc | 1,996 | Thank you very much. President Parry. | 9 |
fomc | 1,996 | Mr. Chairman, strong economic growth is continuing in the Twelfth District, although with some slowing in July from the very brisk second-quarter pace. The California economy has performed very well in recent months, with annualized payroll employment growth averaging 3.4 percent during May through August. Although Los... | 631 |
fomc | 1,996 | President Hoenig. | 4 |
fomc | 1,996 | Thank you, Mr. Chairman. The Tenth District economy remains strong, and I do not have a lot to add to my previous reports. I would point out that our directors continue to report healthy business conditions throughout our District. Retail sales and home building appear to be holding up well in nearly all parts of the D... | 414 |
fomc | 1,996 | President Boehne. | 5 |
fomc | 1,996 | The Philadelphia District economy is growing, but not booming, and attitudes are generally positive. Some labor markets are tight while others still have significant slack. There is some upward pressure on wages but downward pressure on benefit costs, especially health care costs. There are some examples of upward pric... | 462 |
fomc | 1,996 | President Melzer. | 4 |
fomc | 1,996 | Thanks, Alan. Labor markets are tight in the Eighth District according to most contacts. The average unemployment rate for Arkansas, Kentucky, Missouri, and Tennessee was 4.8 percent in July compared with the national rate of 5.4 percent for that month and 5.1 percent in August. A major hotel chain that is planning to ... | 715 |
fomc | 1,996 | President Stern. | 3 |
fomc | 1,996 | Thank you, Mr. Chairman. By almost all objective measures, the economy in the Ninth District remains very healthy. Labor markets continue to be tight and, given the quality of new hires, businesses report spending increasing amounts on training new workers. Our District is one of those where the local measures of housi... | 425 |
fomc | 1,996 | Vice Chairman. | 3 |
fomc | 1,996 | Mr. Chairman, the economy in the Second District continues to pick up, so the positive developments that I began to record two meetings ago for the District continue. Payroll employment in the private sector accelerated in July to annual growth rates of 1.2 to 1.5 percent in New York State, New Jersey, and New York Cit... | 732 |
fomc | 1,996 | Governor Phillips. | 3 |
fomc | 1,996 | Thank you, Mr. Chairman. After reviewing my comments from the last meeting, I conclude that there has not been all that much change. We are still expecting moderate second-half growth, which would be a slowdown, of course, from the first half. The evidence on inflation that came in during the intermeeting period genera... | 842 |
fomc | 1,996 | Governor Meyer. | 3 |
fomc | 1,996 | Thank you, Mr. Chairman. The data that have become available since the August meeting have provided a quite interesting set of crosscurrents. On the one hand, the data indicate that growth has slowed much more sharply in the third quarter than I previously expected, moving down to a pace close to trend. Moreover, the a... | 1,177 |
fomc | 1,996 | Governor Yellen. | 4 |
fomc | 1,996 | Thank you, Mr. Chairman. In reviewing the data that have accumulated since our last meeting, I find myself in rough agreement with the Greenbook's assessment. The evidence clearly points to a reduction in the momentum in aggregate demand with a slackened pace of spending growth now likely in consumption, government spe... | 1,061 |
fomc | 1,996 | Governor Rivlin. | 4 |
fomc | 1,996 | The worried faces around this table, I think we should remind ourselves, are worrying about the best set of problems that we could think of having. Central bankers all around the world would wish for this set of statistics. I think that Mike Prell and some others, who have rightly emphasized the uncertainty and the dif... | 516 |
fomc | 1,996 | Governor Kelley. | 3 |
fomc | 1,996 | Thank you, Mr. Chairman. I think I am well aware and I am certainly deeply respectful of the arguments that would say that inflation is likely to rise and that policy should move now or perhaps sooner than now to prevent it. Of course, this view is based, as we have been discussing, on two central facts--that the econo... | 412 |
fomc | 1,996 | Finally, Governor Lindsey. | 5 |
fomc | 1,996 | Thank you, Mr. Chairman. Last night one of the TV news magazine shows had a story about people who won the mega bucks lotteries, millions of dollars, and ruined their lives. [Laughter] That was a popular thing to show since most of us lose in lotteries and maybe we should be grateful because losing helps us to get on w... | 1,653 |
fomc | 1,996 | On that note, we all can go for coffee. | 11 |
fomc | 1,996 | Mr. Kohn. | 5 |
fomc | 1,996 | [Statement--see Appendix.] | 6 |
fomc | 1,996 | Questions for Don? If not, let me get started. If we cut through the somewhat foggy data for the third quarter, I think that there are two important hard numbers that emerge. One is that no matter how we look at the numbers, it is very difficult to get around the fact that hourly wages and salaries are accelerating. We... | 4,301 |
fomc | 1,996 | Governor Lindsey has a question. | 6 |
fomc | 1,996 | You have a question? | 5 |
fomc | 1,996 | Just a question, yes, about the productivity numbers. President Jordan mentioned that there is a plug in the employment statistics to cover changes in employment associated with business starts. That would all be in the noncorporate sector. How do we know that overstatements of employment in the noncorporate sector are... | 69 |
fomc | 1,996 | Because we have a separate set of numbers for double checking the household numbers. While the household numbers as you well know do not conform to the payroll numbers month by month, it really is quite extraordinary how close those two wholly independent sets of employment data come out over time. It requires some maj... | 134 |
fomc | 1,996 | Mr. Chairman, I support your recommendation for a "B" asymmetric directive. I believe that was the proper judgment to be made in July; it was the proper judgment in August; and it is the proper judgment now. In fact, developments since the last meeting make me even more convinced that this is the correct conclusion. So... | 337 |
fomc | 1,996 | President Parry. | 4 |
fomc | 1,996 | This is going to be a little more difficult given what the Vice Chairman just said, but I would like to indicate that I think there are a number of different arguments that can be put forward to make the case for raising rates, and I am going to argue in favor of doing that. My first and foremost concern involves the l... | 331 |
fomc | 1,996 | President McTeer. | 5 |
fomc | 1,996 | I support the Chairman and his recommendation. | 8 |
fomc | 1,996 | President Moskow. | 4 |
fomc | 1,996 | Mr. Chairman, I support your recommendation. I was fascinated by your discussion of the productivity trends and the analysis that was done. I hope that this will be written up and that you will share it with the members of the Committee. I look forward to reading it. | 54 |
fomc | 1,996 | We will do so. President Jordan. | 8 |
fomc | 1,996 | I support your recommendation. | 5 |
fomc | 1,996 | President Broaddus. | 5 |
fomc | 1,996 | Mr. Chairman, I recognize that there are cogent arguments on both sides of this difficult policy issue. But after sorting it all out, the basic message for me is the one contained in the Greenbook projection--that labor markets are currently tight enough to put continuing upward pressure on wages, which may eventually ... | 257 |
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