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fomc | 1,997 | Questions for Mike? | 4 |
fomc | 1,997 | Mike, I was a little uncertain as to the wealth effects on consumer spending in the Greenbook forecast. I had the impression that there certainly was an impact from higher equity prices in particular, but in the Monday staff briefing to the Board, you seemed to be saying that there was not much of an effect. Would you ... | 72 |
fomc | 1,997 | On our interpretation, there probably has been some positive effect on consumption over the past year or so from the increase in financial wealth. Setting aside measurement problems, that effect likely has in reality been offset at least to some degree by an increased propensity to save based on concerns about retireme... | 275 |
fomc | 1,997 | Thank you. | 3 |
fomc | 1,997 | President Minehan. | 4 |
fomc | 1,997 | I noticed that you built into your forecast for 1998 an increase of 75 to 100 basis points in the federal funds rate. | 28 |
fomc | 1,997 | 75 basis points. | 4 |
fomc | 1,997 | I gather from the wording of the Greenbook and your briefing that that was basically to keep real interest rates stable. But I wondered why you were doing that. At least in my memory, it was a change from earlier Greenbook practices, and I would find it helpful to have your comments on this. Of course, we can see in yo... | 86 |
fomc | 1,997 | We felt quite uneasy about what kind of message the forecast would convey had we retained the assumption of a flat nominal funds rate. We perceived that the underlying strength of demand has been greater than we expected. Extrapolating that to some degree, it exacerbates what we already saw as a fundamental instability... | 193 |
fomc | 1,997 | I certainly do not object to that approach as a forecast. It clearly is in line with a lot of major forecasts. But I thought the whole point of doing the Greenbook, at least the way we have been doing it, was to have something that shows what happens if we do not change anything. | 61 |
fomc | 1,997 | For all practical purposes the assumed rise in the funds rate is tantamount in terms of the economic outcome to your not doing anything over the period 1997 and 1998. | 36 |
fomc | 1,997 | True. | 2 |
fomc | 1,997 | But I thought it might be a useful signal here of what we now perceive to be the longer-term unsustainability of the scenario that we have been drawing in prior Greenbooks. | 36 |
fomc | 1,997 | Thank you. | 3 |
fomc | 1,997 | President Parry. | 4 |
fomc | 1,997 | I think it was useful to get those alternatives, but which of the alternatives do you think would be most closely aligned with an opportunistic approach? | 29 |
fomc | 1,997 | I guess it is a matter of interpretation as to what the opportunistic approach entails. If it entails making sure that the inflation rate does not move above the recent range, then our forecast implies that a policy move is necessary at some point. Whether that means a relatively aggressive approach or something that i... | 186 |
fomc | 1,997 | Mike, if you look back at your forecasts of last summer, you were projecting much lower growth than occurred at the end of 1996 and that you now anticipate through 1997. When you made your comments this morning, I think you used the phrase "entering a boom at this point." I was just wondering if you could step back and... | 98 |
fomc | 1,997 | The "maybe" is an important qualifier. That is not our baseline forecast, but again these are matters of definition. We do have a forecast that, given current money market conditions, now sees the most likely outcome as above-trend growth for an extended period and an unemployment rate that falls to 5 percent or less. ... | 489 |
fomc | 1,997 | Any further questions for Mike? If not, who would like to start the roundtable? President Broaddus. | 23 |
fomc | 1,997 | Mr. Chairman, the Fifth District economy continues a healthy advance. Labor markets remain exceedingly tight throughout most of the District, especially in some of the booming areas of the southern part of the District in the Carolinas along Interstate 85. Wages for skilled labor in that part of our District have been ... | 1,267 |
fomc | 1,997 | There is a wide range of opinions in the way our society is looking at this inflation phenomenon. I don't remember it ever being so broad. I am not talking about the uninformed; I am talking about people who are participating in the system. President Jordan. | 52 |
fomc | 1,997 | Thank you. Regarding the Cleveland District first, both bankers and a retail executive for a national firm expressed their concerns about the construction of additional retail space. There is already excess space as far as they are concerned. Store closings are starting to occur, yet new construction is being planned a... | 1,414 |
fomc | 1,997 | President Hoenig. | 4 |
fomc | 1,997 | Thank you, Mr. Chairman. The Tenth District economy continues to grow at a robust pace. As reported by our directors and other business contacts, growth is strong across the board in all District states and in just about all industries. Our manufacturing survey suggests that firms continue to project strong production ... | 396 |
fomc | 1,997 | President Parry. | 4 |
fomc | 1,997 | Mr. Chairman, strong growth has continued in the Twelfth District in recent months following large gains last year. Although severe winter weather slightly disrupted economic activity in January, we have seen indications of a large bounceback since then. In 1996, District payrolls expanded by about 3-1/2 percent. Emplo... | 668 |
fomc | 1,997 | President Moskow. | 4 |
fomc | 1,997 | Mr. Chairman, the Seventh District economy continues to expand at a modest rate that is somewhat slower than the nation's but its growth is consistent with a regional economy that is at full resource utilization. However, activity in a number of sectors has been stronger than expected so far in 1997. For example, both ... | 1,062 |
fomc | 1,997 | President Minehan. | 4 |
fomc | 1,997 | Mr. Chairman, the New England economy remains quite healthy. In fact, it is healthier than we thought it was. As I reported before, we had been tracking regional employment growth at about half the national pace. The spring benchmark revisions to the employment data showed that, in fact, jobs were expanding at just abo... | 755 |
fomc | 1,997 | I used to write COBOL. Maybe I could go into business. Perhaps I should make a few telephone calls! [Laughter] | 27 |
fomc | 1,997 | Right. You have to find all the programs where only two digits are embedded instead of four. | 19 |
fomc | 1,997 | Vice Chair. | 3 |
fomc | 1,997 | Mr. Chairman, the Second District economy has shown continued signs of strength in the first quarter. Payroll job creation remains sturdy, and job growth was revised up a bit for 1996 and early 1997. New York State's unemployment rate was stable, while New Jersey's fell to a six-year low. Benchmark revisions to 1996 un... | 833 |
fomc | 1,997 | Mr. Guynn. | 5 |
fomc | 1,997 | Thank you, Mr. Chairman. I, too, am an old COBOL programmer. If you go into business, I hope you will give me a call; I would love to be your partner. | 41 |
fomc | 1,997 | We will increase Federal Reserve earnings! | 7 |
fomc | 1,997 | The economic picture that emerges in the Southeast has many parallels to what is going on nationally. At the same time, as I reported at the last meeting, the overall rate of economic expansion in our region has settled back somewhat from what it was earlier in the expansion. When I talk about some slowing, it is from ... | 1,092 |
fomc | 1,997 | President Boehne. | 5 |
fomc | 1,997 | The Philadelphia District economy is operating at a high level. Intense competition, however, seems to be keeping the lid on wages and prices. Manufacturing is doing well; retail sales are generally good. Commercial real estate is shifting from a buyer's market to a seller's market. Vacancy rates are going down; rents ... | 527 |
fomc | 1,997 | President Stem. | 3 |
fomc | 1,997 | Thank you, Mr. Chairman. Most measures of economic activity in the Ninth District remain positive. In particular, labor markets are still tight, and there are widespread labor shortages. But we are at the point that this is so familiar, so much a part of the landscape, that people mentioned it only in passing. Wage pre... | 469 |
fomc | 1,997 | Governor Rivlin. | 4 |
fomc | 1,997 | We have all been watching this remarkable economy with some puzzlement for the last several months. Until now, the signs of strength in the private domestic economy always seemed to be mixed with some signals that the expansion might be slowing down. What strikes me at this point is that the signs of a slowdown are nea... | 371 |
fomc | 1,997 | Okay, let's do it! [Laughter] | 10 |
fomc | 1,997 | The long-run effect depends on whether the budget legislation includes significant reductions in the growth of Medicaid and Medicare. I think the chances are quite good that it will. Nevertheless, the effects will be mostly psychological and possibly not particularly strong even there. The real effect of having a deal ... | 236 |
fomc | 1,997 | President Melzer. | 4 |
fomc | 1,997 | Thanks, Alan. The Eighth District economy continues to operate at a high level. Contacts report little or no change in the growth rate of economic activity in the past few months and continue to be optimistic about the near term. With unemployment rates well below the national level, labor markets remain tight in much ... | 668 |
fomc | 1,997 | President McTeer. | 5 |
fomc | 1,997 | The economy in the Eleventh District remains healthy. While data for January showed an actual decline in District employment levels, I am inclined to discount those figures because of weather-related factors and because they are inconsistent with the anecdotal evidence that we have been getting from all our boards of d... | 679 |
fomc | 1,997 | Governor Meyer. | 3 |
fomc | 1,997 | Thank you, Mr. Chairman. I want to focus on two key questions about the outlook that I believe should shape our decision about monetary policy today. First, how does the economic environment, meaning both the recent data and the current forecast, differ today from that prevailing at the July and September FOMC meetings... | 1,634 |
fomc | 1,997 | Governor Kelley. | 3 |
fomc | 1,997 | Thank you, Mr. Chairman. For a number of meetings now, the economy has seemed to be deja vu. For some time, we have felt that we were looking at a fully utilized economy, one with tight and tightening labor markets that seemed likely to begin to show escalating labor costs and from there escalating inflation--in short,... | 729 |
fomc | 1,997 | Is that the result of the floods? | 8 |
fomc | 1,997 | I started to say something like that, Mr. Chairman, but I thought that was just taking it too far. | 23 |
fomc | 1,997 | I am glad you restrained yourself from referring to the notion of excess liquidity. [Laughter] | 19 |
fomc | 1,997 | I would not want to see us get under water. [Laughter] | 15 |
fomc | 1,997 | Governor Phillips, I think you better talk now. | 10 |
fomc | 1,997 | My goodness. Well, I guess I am batting cleanup here. Last month we were trying to determine whether the returns for the fourth quarter of 1996 and early 1997 constituted a temporary burst of energy and the economy was about to settle down to the proverbial sustainable growth trend or whether those developments marked ... | 707 |
fomc | 1,997 | I assume that the Beigebook did pass through the group around this table before it got out to the public. I would suggest that you all go back and read it. It really is quite interesting to see the difference between what is in that document and what was said around this table today. Shall we go to coffee? | 65 |
fomc | 1,997 | Mr. Kohn. | 5 |
fomc | 1,997 | Thank you, Mr. Chairman. [Statement--see Appendix.] | 13 |
fomc | 1,997 | Questions for Don? If not, let me start off. It is quite evident that we have come to a point, as we suggested we might at the last meeting, where as Don put it--how did you put it? | 46 |
fomc | 1,997 | "Deliver." | 3 |
fomc | 1,997 | We have to "deliver." Let me, however, review the various aspects of what is going on and try to put them into a policy context, which I think we need to fashion fairly carefully. Let me start with something that has not been discussed very much around the table this morning. The proposition that inflation has stopped ... | 3,541 |
fomc | 1,997 | I would strongly support this set of moves--the 25 basis points and a symmetric directive. I think what we say about our action is terribly important, not just in the announcement but what we all say about it over the next few days. I believe the key words should be that we want to sustain the growth of the economy and... | 142 |
fomc | 1,997 | Governor Meyer. | 3 |
fomc | 1,997 | Thank you, Mr. Chairman. I strongly support your recommendation for a 25 basis point increase in the funds rate, and I can accept your recommendation for a symmetric directive though I could have been persuaded to go for an asymmetric one. I will come back to that later. I want to focus my remarks, though, on an analyt... | 1,193 |
fomc | 1,997 | Vice Chair. | 3 |
fomc | 1,997 | Thank you, Mr. Chairman. I think that the best thing to concentrate on at the moment, or at least what I find myself concentrating on, is what we do not know. Even though we have had a lot of rather good albeit partial explanations, I think we are not, and certainly I am not, altogether sure why inflation and the cost-... | 414 |
fomc | 1,997 | President Hoenig. | 4 |
fomc | 1,997 | Mr. Chairman, I support your recommendation on the federal funds rate. Though I might prefer asymmetry, given your comments I would also support symmetry. | 30 |
fomc | 1,997 | President Broaddus. | 5 |
fomc | 1,997 | Mr. Chairman, I can accept your recommendation. On balance, I think the case for a larger move is stronger than indicated by others who have spoken to this point. But I am satisfied with 1/4 point. It is a way of getting back into the ballgame, so to speak, and reaffirming our longer-term commitment to price stability.... | 262 |
fomc | 1,997 | President Parry. | 4 |
fomc | 1,997 | Mr. Chairman, I should mention that the estimated Taylor Rule, which we use as a policy reaction function in our forecasting model and which I think is preferable to the original Taylor formulation, suggests a gradual rise in the funds rate totaling about 100 basis points, with the increases beginning in the second qua... | 235 |
fomc | 1,997 | President Moskow. | 4 |
fomc | 1,997 | Mr. Chairman, as we all have said, we need to be forward-looking in our policy, and I think a rate of inflation as high as the forecast we have seen today is clearly unacceptable. Just looking at the Greenbook forecast of a core inflation rate of 3.2 percent by 1998, that rate would increase to 3.6 percent if we added ... | 192 |
fomc | 1,997 | President Minehan. | 4 |
fomc | 1,997 | Mr. Chairman, I fully support your recommendation for both the 25 basis points and the symmetric directive. I, like many others, could support an asymmetric directive as well, but I think your wisdom in this case is good as usual. | 48 |
fomc | 1,997 | President Boehne. | 5 |
fomc | 1,997 | I support a 25 basis point increase. We ought to explain this tightening action by indicating that we think we will increase the chances of prolonging the expansion by moving now. We central bankers ought to like job creation; we ought to like growth; we ought to like prosperity, and I think we ought to explain our act... | 163 |
fomc | 1,997 | President Stem. | 3 |
fomc | 1,997 | I am generally comfortable with your recommendation, Mr. Chairman. I do not want to dwell on too many nuances, but let me just make a couple of additional comments. Like President Broaddus, if I interpreted him correctly, I guess I am somewhat less confident than you that we are not behind the curve. My concern is that... | 278 |
fomc | 1,997 | President Guynn. | 4 |
fomc | 1,997 | I, too, am comfortable with your recommendation, Mr. Chairman. I came to this meeting with a preference for an asymmetrical directive, and even after the discussion, I still have a slight preference for that. But you and others have argued very persuasively that it is not a big deal in present circumstances, so I am co... | 73 |
fomc | 1,997 | Governor Phillips. | 3 |
fomc | 1,997 | I support your recommendation to tighten 25 basis points. I am not sure how much tightening ultimately is going to be needed, but caution seems appropriate when we change the direction of policy. I support a 25 basis point move. At 5-1/2 percent, we may not be that far out of alignment, so symmetry seems like the right... | 75 |
fomc | 1,997 | President Melzer. | 4 |
fomc | 1,997 | Alan, I agree with what you said in terms of the likelihood of more tightening down the road. I think we will need to do more, and I might be inclined to do more at this point, but I can accept your recommendation. | 48 |
fomc | 1,997 | Governor Kelley. | 3 |
fomc | 1,997 | Mr. Chairman, I support the 25 basis points and I support the symmetrical directive on its merits. | 21 |
fomc | 1,997 | President Jordan. | 3 |
fomc | 1,997 | We are now entering the seventh year of the expansion as dated by the National Bureau. For the most part, it has been an extraordinary expansion in that not only has inflation been contained, but more importantly it has tended to drift down through this expansion period, which is remarkable. Last summer when Fed watche... | 501 |
fomc | 1,997 | We have acceptance of 25 basis points and--I'm sorry. President McTeer. | 18 |
fomc | 1,997 | Ditto. [Laughter] | 7 |
fomc | 1,997 | Ditto what? | 4 |
fomc | 1,997 | I agree with your recommendation, and I also agree with Governor Rivlin and Ed Boehne on the pro-growth rhetoric. | 25 |
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