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fomc | 1,978 | Thank you, John. Ernie. | 8 |
fomc | 1,978 | Mr. Chairman, as you all know, the Southwest continues to be boom country, and I have the impression that that is becoming a more and more common state of affairs around the country. As to the general economic picture over the next year, I am inclined to think that we are going to see, as has been suggested, a continue... | 175 |
fomc | 1,978 | On a daily basis. | 5 |
fomc | 1,978 | Yes, I think the record shows that, according to studies that have been done. I think how soon it comes to an end depends on how much of a speculative surge develops. While I am pretty sure it is developing, I would hope that it will not come forth with such a thrust that [the expansion] has to be as short-lived as Chu... | 582 |
fomc | 1,978 | Thank you. Frank. | 5 |
fomc | 1,978 | Well, Mr. Chairman, a month ago I was concerned that the third quarter was going to come in a lot stronger than the staff had projected. In particular, I thought that was a possibility because I feared that a surge of investment might be accompanying the changed thinking that was then evident in Wall Street. And I foun... | 770 |
fomc | 1,978 | You don=t mean 6 percent. Do you mean 6 percent over the four quarters? | 19 |
fomc | 1,978 | Yes. | 2 |
fomc | 1,978 | Okay. I was only making sure we got it right. | 12 |
fomc | 1,978 | Well, I don=t know what the average of the four quarters [would be], but I think we will be moving back to a 6 percent inflation rate over time. | 35 |
fomc | 1,978 | Yes, I understood that. | 6 |
fomc | 1,978 | But the real question in my mind is whether we can avoid a recession in 1979. That I think is the key. | 26 |
fomc | 1,978 | What would be your unemployment figure? | 7 |
fomc | 1,978 | Well, I'd say it would probably be somewhat above 6 percent. But I think we=re going to have a very difficult job, even with a lot of luck, engineering things so that we can avoid a recession in 1979. Now, I think Larry called our attention to this projected deceleration in monetary growth rates, which comes automatica... | 159 |
fomc | 1,978 | You'd get a credit crunch at that time. | 10 |
fomc | 1,978 | Sure. So it seems to me that the fundamental issue is not what the growth rate is going to be in '79, but whether policies can be geared to avoid nosing into a recession in say, the second quarter. Now, you might argue perhaps that a mild recession--if it could be kept mild enough--might not be all that bad. That=s off... | 264 |
fomc | 1,978 | That would be ideal. | 5 |
fomc | 1,978 | But at least you can tie it to this automatic transfer effect; that=s a good rationale for departing from it. And maybe you could add M3, since M2 and M3 do move together in a reasonably predictable way and we=d be out from under M1 as a guideline. I think that would be a great step forward and save a lot of trouble in... | 77 |
fomc | 1,978 | That=s like walking out on your wife every time you have an argument! | 15 |
fomc | 1,978 | The problem is we=re supporting two women and they=re running off in different directions. | 17 |
fomc | 1,978 | It=s very expensive. | 5 |
fomc | 1,978 | I=ve always liked a more stable woman myself. | 11 |
fomc | 1,978 | I think we=re all monogamous at heart. | 11 |
fomc | 1,978 | Thank you very much. Phil. | 7 |
fomc | 1,978 | Mr. Chairman, I am troubled with trying to give a forecast, troubled between what I think is coming up against what I=d like to see come. I think I=d agree with much of what Phil and Chuck have said--that it looks like we=ve got strength here that if left unchecked is going to create a sharp downturn next year. I=d lik... | 510 |
fomc | 1,978 | Did we get your GNP number? | 8 |
fomc | 1,978 | If you want to forecast GNP without much change, you=re going to have it somewhere in the 4 percent [area]; I=d prefer to aim at a little less than 3. The unemployment figure I=ve given you. | 48 |
fomc | 1,978 | Thank you. Henry. | 5 |
fomc | 1,978 | Well, it looks as though we are coming in for some sort of landing. It is not clear whether it will be a soft one and I think it very much depends on what we do. If you look ahead one year, monetary policy has time to be effective. If we do what is in the Bluebook which, of course, is a purely statistical exercise, I t... | 609 |
fomc | 1,978 | From here on? From the second quarter-- | 9 |
fomc | 1,978 | Yes, the next 12 months. And likewise on GNP I=d be inclined to say that we would be at 3-1/4 percent a year from now. We might have a little more, of course, over that period. Unemployment [I'd put at] 6 percent. But the main issue really depends on whether inflation becomes such that the economy and any reasonable mo... | 90 |
fomc | 1,978 | Thank you, Henry. Steve. | 7 |
fomc | 1,978 | Well, you just heard a very scholarly presentation and you=re not going to get one now. | 19 |
fomc | 1,978 | We=ve heard sixteen! Fifteen--you and I are left. We=re in trouble. | 20 |
fomc | 1,978 | I have no staff so I=m glad to accept the staff=s work and material. I noticed the Presidents often comment on their staff and the Board=s staff but I don=t have that problem since I don=t have a staff at all. The feeling I have is always related to where we=ve been. I think back to a year ago and unemployment was just... | 737 |
fomc | 1,978 | Steve, you put your GNP at what? | 10 |
fomc | 1,978 | Four. | 2 |
fomc | 1,978 | Thank you very much. Let me make a couple of observations. One is that I would think this exercise this morning has proved conclusively that economics is a science. Second, I would ask the Secretary to retain all of these estimates that we=ve been getting since March. And when we come around to next March, we=ll be abl... | 122 |
fomc | 1,978 | Do we get a raise if we=re right? | 10 |
fomc | 1,978 | No, you get a cut if you=re wrong. | 11 |
fomc | 1,978 | I=ll tell you. The deal is you get to keep your job if you=re right. Okay? Let me make a few quick observations. One [relates to] the Redbook. My experience with business people is that they=re always looking at last month=s performance and they look at it the end of the following month. They=re always, therefore, slig... | 708 |
fomc | 1,978 | Well, ladies and gentlemen, let me call the meeting back [to order] and remind you that we have a luncheon at one o'clock and a meeting on membership at 2:15 p.m. And I'd remind some of you that we=re meeting tomorrow on delegation. While this morning=s session has so far been outstanding, particularly in the degree of... | 166 |
fomc | 1,978 | [Statement--see Appendix.] | 6 |
fomc | 1,978 | Thank you very much, Peter. Any questions? Bones. | 12 |
fomc | 1,978 | Peter, did I understand you to suggest that the dealers would be upset with an increase after today=s meeting? | 22 |
fomc | 1,978 | If something were done in a very highly visible form just in the next day or so, I think that might be a bit [upsetting] because they=re bidding on a coupon issue. But they would not be that surprised by something that developed by the end of this week. | 56 |
fomc | 1,978 | Any other questions? We need the approval of the Committee to ratify transactions since the previous meeting. Hearing no dissent, we will record that as approved. Let's turn to the comments of our chief economist, Steve Axilrod. | 46 |
fomc | 1,978 | [Statement--see Appendix.] | 6 |
fomc | 1,978 | Thank you very much, Steve. Are there any questions to Steve? Yes, Dave. | 18 |
fomc | 1,978 | Steve, I wonder if you have any thoughts about the possibility of a leveling of interest rates five or six months from now. | 25 |
fomc | 1,978 | Well, President Eastburn, if I abstract from that 2-1/2 percent and assume that the Committee permits this--doesn=t attempt to make up, in effect, for the second-quarter overshoot and doesn=t attempt to make up for the third-quarter overshoot--then I believe that it is quite possible that interest rates will begin to l... | 159 |
fomc | 1,978 | Well, gentlemen we have two major matters of business: (1) the directive and (2) the language. I would suggest that we run through the Committee to get your suggestions for the directive first and look at the language second. Since I cut our Vice Chairman short the last time and left him to the end, the least I can do ... | 86 |
fomc | 1,978 | Well, I=ll try to be short, Mr. Chairman. Despite the comments I made earlier on being skeptical about the longer-term outlook for business, I do think it=s strong at the moment. We do have these inflationary pressures. We do have speculative concerns that have been referred to. I think we have an expectation in the ma... | 406 |
fomc | 1,978 | Thank you, Paul. Why don=t we run down the Committee alphabetically. Ernie. | 19 |
fomc | 1,978 | Mr. Chairman, I would accept Paul=s suggestion and the alternative B suggestion for 7-1/2 to 8 for the federal funds range. But I would like somewhat narrower and significantly lower ranges on the aggregates--4 to 8 on M1 and 4 to 9 on M2--with the directive in the aggregates form and embracing most of your suggested n... | 161 |
fomc | 1,978 | Phil Coldwell. | 4 |
fomc | 1,978 | Mr. Chairman, I approach this from a standpoint that we=re having too high a rate of inflation and, therefore, have to cut it back. If you want to translate this into what we should do now, I think we need to tighten up and that means raising the federal funds rate. I would go to 7-3/4 percent promptly. I would leave o... | 252 |
fomc | 1,978 | Thank you. Dave Eastburn. | 7 |
fomc | 1,978 | Well, I think there are risks in further tightening, but I think they are risks that we have to take, and I like Paul=s prescription. I think that we should move the funds rate up to 7-3/4. We might want to pause at that time and consult depending on what the aggregates show. And somewhat lower on both the top and the ... | 100 |
fomc | 1,978 | Thank you, Dave. Steve Gardner. | 8 |
fomc | 1,978 | I can agree with Paul and Dave on the measures specified. I=m a little bit concerned about going up because everybody expects it, and the market has discounted it and everything else but I guess there=s no alternative. | 43 |
fomc | 1,978 | They=ve got to be right once in a while. Would you prefer the 5 to 10 or the 5 to 9 range, Steve? | 32 |
fomc | 1,978 | I would much prefer 5 to 10. | 10 |
fomc | 1,978 | Thank you. Phil Jackson. | 6 |
fomc | 1,978 | I would concur that we need to go up [on the funds rate]; I wouldn=t move as promptly as has been discussed. I would move perhaps over the next week to ten days to 7-3/4 instead of jumping immediately, as I got the sense was the others= inclination. I am concerned about lowering the ranges from the point of view that t... | 200 |
fomc | 1,978 | Phil, you could use the money market directive. | 10 |
fomc | 1,978 | Yes, but even then it strikes me that you=re running a danger in that sense. So for that reason I would be inclined to use the 6-1/2 to 10-1/2 and the aggregates directive. If we=re going to use a money market directive, it strikes me that the top might well be 9 to 9-1/2 because I think if we have a July that runs 9 p... | 165 |
fomc | 1,978 | Either way. Well, we always like flexibility! Chuck. | 12 |
fomc | 1,978 | I would be reluctant to cut the aggregates limits because I think there=s a considerable exposure to July being a fairly big month on M1, which has been the case in the last number of quarters for the beginning month of the quarter. Also, M2 [growth could be strong] with the new money market certificate, which under th... | 497 |
fomc | 1,978 | Thank you, Chuck. Henry. | 7 |
fomc | 1,978 | Well, I would like to move up the funds rate. I=d like to give us room to go from 7-1/2 to 8-1/4 but with consultation at 8. I think we have to recognize that, whatever we call it, we're really on a funds rate target and that every move now is very sensitive, so we ought to have more consultation. As far as the directi... | 186 |
fomc | 1,978 | Thank you, Henry. Mark. | 7 |
fomc | 1,978 | Let me make just one comment on interest rates, since so many people have commented on them, before I give my projections. We have moved interest rates up fairly significantly this year. And yet if you look at the increase in rates in this expansion relative to a comparable point in previous expansions, we=re way below... | 373 |
fomc | 1,978 | Thank you very much. Willis. | 7 |
fomc | 1,978 | Mr. Chairman, I have a feeling that we stopped reading on page 6 when the problem got severe and didn=t look ahead to what is an alternative for us. | 34 |
fomc | 1,978 | Some of us may have stopped earlier than that! | 10 |
fomc | 1,978 | My feeling is that market conditions are more favorable for action now than they will be in the future, with possibly accelerating credit demands, and that we should push now to try to moderate things rather than be faced with rate increases in the fall. My inclination would be a federal funds range of 7-1/2 to 8, with... | 117 |
fomc | 1,978 | Thank you very much. John Balles. | 9 |
fomc | 1,978 | Some of my colleagues happened to hear me say my glasses fell apart when I came into the room this morning so I suffer from a little case of myopia and I guess I lean toward short-sighted policies today. That was supposed to be a joke! My main concern for at least the last two years has been the lack of a systematic wa... | 331 |
fomc | 1,978 | Thank you. Bob Black. | 6 |
fomc | 1,978 | Mr. Chairman, I asked Art Broida if he would distribute a table here which I think brings into focus the major problem as I perceive it. It=s not a very complicated table, and I think we=re all aware of what it says. But it does go back to the first period when we set our target ranges a year ahead, back in March of 19... | 761 |
fomc | 1,978 | Thank you, Bob. Roger. | 7 |
fomc | 1,978 | Mr. Chairman, I think Paul Volcker fairly well expressed my view. I have just a couple of comments about the range of 5 to 10. Somebody around the table mentioned that July could come in much stronger than is being projected by the staff and I guess I am fearful that that will occur. It seems that in each of these quar... | 161 |
fomc | 1,978 | To be at the upper end. | 7 |
fomc | 1,978 | At the upper end--that=s correct. If we get that kind of growth, I would hope that the Committee, whether it be in consultation or otherwise, would indeed move onto the 8 percent funds rate level before the meeting next month. I'd really suggest Paul Volcker=s range of 5 to 10, with a federal funds range of 7-1/2 to 8,... | 114 |
fomc | 1,978 | Thank you. Bones. | 5 |
fomc | 1,978 | Mr. Chairman, admittedly interest rates have been moving up. I, nevertheless, have failed to detect that it has deterred very much the hectic pace of bank lending. So I think it=s appropriate in that context, plus our enormous concern for continued inflation, to continue our move. I would like to see the funds range un... | 139 |
fomc | 1,978 | Thank you. Bob Mayo. | 6 |
fomc | 1,978 | Well, Mr. Chairman, I think our dilemma here is pretty obvious, even to those of us who feel that some sort of an economic growth now and a slide maybe next year is likely. Again, I think we have a responsibility to exercise a very careful monetary policy that will steer us on this narrow road. We can=t take the peaks ... | 296 |
fomc | 1,978 | Thank you, Bob. Frank Morris. | 8 |
fomc | 1,978 | Mr. Chairman, I guess I=m in a minority of one so far. Since I now feel that the third quarter is going to show the slowdown that the staff has been projecting for some time, I=m a little less hawkish on monetary policy than I would otherwise have been. So I would go for the alternative A funds range of 7-1/4 to 7-3/4 ... | 176 |
fomc | 1,978 | Thank you, Frank. Larry. | 7 |
fomc | 1,978 | For M1, 4 to 8 and for M2, 6-1/2 to 9. And the most important thing that we should do is to attempt not to inhibit the rise of the federal funds rate. Being a moderate like my friend Mark Willes, I'd say 7-1/2 to 8-1/4. I=d rather go above that and I do recommend to everybody who is sitting at that side of the table, a... | 153 |
fomc | 1,978 | Not if you look at absolutes. | 8 |
fomc | 1,978 | Well, we=ve had a complete rundown except for my comments. Let me just take these in order. For the range on the fed funds rate, we have one, two, three, four, five, six, seven of the voting members, not counting myself, who prefer 7-1/2 to 8, which would indicate the majority. I don=t know whether those who preferred ... | 228 |
fomc | 1,978 | Looks like 5 to 10 would be a good average. | 13 |
fomc | 1,978 | Yes, I think that looks about right, Phil. Let me, therefore, formulate [a proposal]. If 5 to 10 is about right [for M1], it looks like it=s almost the same thing for M2; I don=t really see that much variation. Let me suggest for the ranges, just for a straw poll, 5 to 10, 5 to10, and 7-1/2 to 8 [on the funds range], m... | 113 |
fomc | 1,978 | By the end of this week? | 7 |
fomc | 1,978 | End of this week or early next week. Chuck, what was your view? | 16 |
fomc | 1,978 | Well, I would want to move to 7-5/8 by the end of this week. There is also this financing question that Peter raised, and to do a quarter by the end of this week may be a little-- | 47 |
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