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fomc | 1,997 | I knew I was missing an important voice. | 9 |
fomc | 1,997 | If you want, I will tell you an Aggie joke! [Laughter] | 17 |
fomc | 1,997 | We don't have time for that! | 7 |
fomc | 1,997 | There is a marginal consensus toward symmetry as the first choice. Therefore, I will ask your vote on 25 basis points with symmetry. | 27 |
fomc | 1,997 | The directive wording is from page 12 of the Bluebook: "In the implementation of policy for the immediate future, the Committee seeks to increase slightly 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 ... | 153 |
fomc | 1,997 | Given the possibility that we would do this, I already have a draft of what we may want to announce. I will read the whole draft announcement. "The Federal Open Market Committee decided today to tighten money market conditions slightly, expecting the federal funds rate to rise about 1/4 percentage point to around 5-1/2... | 223 |
fomc | 1,997 | Mr. Chairman, one suggestion for your consideration. | 10 |
fomc | 1,997 | Sure. | 2 |
fomc | 1,997 | About two sentences from the bottom, you list inflation first and growth second. I would suggest reversing the order in which you say those two things. | 29 |
fomc | 1,997 | Let me think about whether the grammar holds. | 9 |
fomc | 1,997 | We have to do that for sure. | 8 |
fomc | 1,997 | I had the same reaction. It was a little heavy on inflation, and since we do not have any, I don't think we want to be stressing that quite so much. | 35 |
fomc | 1,997 | You favor reversing the order in that sentence? | 9 |
fomc | 1,997 | Yes, or some other verbal means of emphasizing growth a little more, inflation a little less. | 19 |
fomc | 1,997 | That is the reason the previous sentence says in part "and prolonging the economic expansion." It was meant to capture that thought. | 26 |
fomc | 1,997 | It is there. | 4 |
fomc | 1,997 | Let me see if it creates grammatical monstrosities to reverse the sequence in the last sentence. Let me remind everybody that we are going to lunch to say our best departing words to Janet Yellen, and a lot of people will be there who do not have access to what we have done. The announcement will not be released until ... | 189 |
fomc | 1,997 | At 1:00 p.m. | 8 |
fomc | 1,997 | Would somebody like to move approval of the minutes? | 10 |
fomc | 1,997 | Move approval. | 3 |
fomc | 1,997 | Without objection. Mr. Fisher. | 7 |
fomc | 1,997 | Thank you, Mr. Chairman. I will be referring to a package of six colored charts with a peach FOMC Class II cover. [Statement--see Appendix.] | 34 |
fomc | 1,997 | The dollar/yen decline from May 5 through this morning is as sharp as I recall a major exchange rate ever moving. Is my memory faulty or is this a quite extraordinary shift? | 37 |
fomc | 1,997 | Yes, it is extraordinary. I'm sorry that I don't know precisely how it compares with large movements in the past, but I think the shift over this period of several days now exceeds the dollar/yen move during February 1994 after the Clinton/Hosokawa disagreement on trade. I can't recall any larger move over the last 5 y... | 70 |
fomc | 1,997 | Do we have any evidence that the Bank of Japan was selling U.S. Treasuries in this period? | 22 |
fomc | 1,997 | No. | 2 |
fomc | 1,997 | In other words, you are not picking up evidence of official intervention in the data or other sources of information, and as far as you can see, the currency price change is strictly the result of private market forces. | 43 |
fomc | 1,997 | That goes one step further than I would be comfortable with. Let me try to explain what I only hinted at in my statement, namely, the impact on the dollar of intervention by the Bank of Thailand and other Asian central banks.- I will try to be pithy about this. I think the simplest example is to take the Hong Kong doll... | 286 |
fomc | 1,997 | Since we know the particular days when the dollar was under real tension, and I presume that we at least had the benefit of some judgment from market sources, if not officially, as to when a lot of the intervention and related movements of funds was occurring, can we trace such intervention to the actual days in which ... | 71 |
fomc | 1,997 | Yes, the dollar's weakness occurred on the days when the Bank of Thailand initially intervened in size, May 6 and 7, but not so much in the days that followed. May 6 and 7 were days when the Bank of Thailand's defense of its currency was building up, although there were indications that they had been defending their cu... | 133 |
fomc | 1,997 | It doesn't necessarily have to happen immediately. | 8 |
fomc | 1,997 | No, no. | 4 |
fomc | 1,997 | What happens is that portfolio adjustments start to cascade-- | 10 |
fomc | 1,997 | Yes, precisely. | 4 |
fomc | 1,997 | And it takes a few days at least for that to work its way through. A lot of it is essentially automatic because individuals have no particular desire to sell dollar holdings, but they end up with a maldistribution to which they have to adjust, and that is what has been happening. Governor Rivlin. | 61 |
fomc | 1,997 | Peter, what do you think you learned from the April surprises affecting the federal funds rate, or what do you think you need to learn before next April? | 31 |
fomc | 1,997 | That we all need to go back to the drawing board on forecasting taxes, and I will not pretend to be the expert on that subject. I think our projection problems were universal--New York, the Board, and the Treasury. None of us had it right. Mike Prell may be able to offer more insights into this than I. Such a study cle... | 109 |
fomc | 1,997 | Do we have sufficient regional data to help us locate as we go along where an excess Treasury balance is coming from? | 23 |
fomc | 1,997 | No, we do not. There is a rather disappointing inability to take the Treasury tax information and quickly derive statistics that we would find useful. | 28 |
fomc | 1,997 | We have daily information on some regional characteristics of the tax receipts, and we know from the statistics of income where there are big capital-gains taxpayers and what may change. Has anyone been able to infer anything from the regional pattern? | 46 |
fomc | 1,997 | I am not aware that anyone has tried that; it is an interesting idea. It sounds like a lot of work. | 24 |
fomc | 1,997 | Big Blue could do it. [Laughter] | 10 |
fomc | 1,997 | I am not sure that we have that much free computer space right now! We can check into it. | 21 |
fomc | 1,997 | The other part of your question, Governor Rivlin--or the other part of my answer--is that I was very pleased that our announcing the quantity of RPs helped the market get a quicker handle on how far off we all were on our forecasts, and that I think was a help. We did operate twice in one day on two occasions. That was... | 212 |
fomc | 1,997 | President Parry. | 4 |
fomc | 1,997 | Throughout this period, wasn't there evidence of a reduced appetite for U.S. securities by Japanese investors and some speculation that the Ministry of Finance actually had played a role in this reduced appetite? | 37 |
fomc | 1,997 | Anecdotally, we at the Desk have heard the same stories. I have not been able to see that in any data anyone has shown me, but there are some lags in this process. | 42 |
fomc | 1,997 | There will be data on that? | 7 |
fomc | 1,997 | There will be some data on that. I have heard it said by a number of people whose views on the markets I respect that they think the very sharp movement in the dollar/yen means that U.S. Treasuries are now at attractive levels for Japanese investors to purchase on the principle that they have taken losses and it is don... | 130 |
fomc | 1,997 | Mr. Hoenig. | 5 |
fomc | 1,997 | Peter, in your statement, you said that you thought there were more adjustments to come in the dollar/yen. I don't know if that had to do with portfolio adjustments. Can you elaborate on that just a little? | 44 |
fomc | 1,997 | I just mean that this is only an initial round of market expectations that the Bank of Japan may start tightening sometime later this year. Differentials remain rather wide against yen fixed-income assets. I do not mean to draw a perfect analogy from this, but in 1994 the Committee started raising rates in February and... | 192 |
fomc | 1,997 | Any further questions for Peter? Would somebody like to move approval of the Desk's operations? | 18 |
fomc | 1,997 | Move approval of the domestic operations. | 7 |
fomc | 1,997 | Thank you, is there a second? | 8 |
fomc | 1,997 | Second. | 2 |
fomc | 1,997 | Without objection. Let us move on to the economic report, Mr. Prell. | 17 |
fomc | 1,997 | Thank you very much, Mr. Chairman. Carol Low is distributing a table to which I will be referring in a couple of minutes. [Statement--see Appendix.] | 33 |
fomc | 1,997 | Questions for Mike? | 4 |
fomc | 1,997 | Mike, the story you tell about the past and your concerns about the future are consistent with a supply side surprise--a productivity shock. In a passive sense, what happens is that we accommodate the existing demand because we peg a nominal interest rate while the natural rate--the real rate--is shifting up during the... | 173 |
fomc | 1,997 | You are talking about the natural rate of interest, I presume. | 13 |
fomc | 1,997 | Right. | 2 |
fomc | 1,997 | I guess one could interpret what I have said about the stocks of capital goods and so on as implying a lower natural rate going forward. One could look at this from various vantage points. Whether, indeed, one should view the development of surprisingly strong growth over the past year as a favorable supply shock, I am... | 212 |
fomc | 1,997 | President Jordan, in thinking about the real rate relative to its equilibrium or natural level, I don't believe that a real rate a bit below its equilibrium level, as apparently it has been, would be inconsistent with the staff forecast. In fact, it is perfectly consistent with the economy producing at a level beyond i... | 150 |
fomc | 1,997 | I am not clear on that. I understand that your framework is different, but if growth in nominal demand accelerates to a rate of 8 percent, as it did in the first quarter, what are the dynamics that will cut such growth in half unless you say the surge is all statistical error and it will unwind itself? But if the dynam... | 94 |
fomc | 1,997 | Can I answer that? I think there are two factors that, taken together, are consistent with your framework. One involves inventories. If we have a buildup in inventories that is incapable of being sustained at the same rate, we do not have to have a change in the actual interest rate versus the natural rate for the grow... | 194 |
fomc | 1,997 | For confirming evidence of that, we would expect to see slower money and bank credit growth emerge in this period. At least the staff projection, I take it, is that we are going to get that. Some of the surge never was real because it reflected bad seasonals and an inventory buildup that will go away. To be sure that i... | 93 |
fomc | 1,997 | Barring some shift in the demand for money--this is almost tautological--we would expect to see slower money growth with the moderation in nominal GDP expansion that we are anticipating. But our forecast in a sense says that, on an intermediate-term basis rather than looking quarter-to-quarter and defining movements in... | 120 |
fomc | 1,997 | In our judgment, President Jordan, we are seeing some slowing in money growth in recent months when we abstract from the accumulation of balances for the payment of taxes. In looking through that kind of thing and taking account of the fact that we have essentially a no-growth forecast for M2 in May, we think that the ... | 88 |
fomc | 1,997 | As you know, we use MZM to monitor how these things happen because it does not have the sweep problem. It grew at a rate of 8 percent in the first quarter, right in there with nominal GDP. For the second half of this year, we would expect MZM to get down to a 3 to 4 percent growth rate if this forecast is right. | 76 |
fomc | 1,997 | As we have pointed out previously, the money demand relationship, the relationship of velocity and opportunity cost, has been quite stable over the past couple of years. And we have not had a big movement in interest rates, so you would expect close to equal growth of M2 and nominal GDP. | 58 |
fomc | 1,997 | Okay, any further questions for Mike? If not, would somebody like to start the Committee discussion? Mr. President. | 24 |
fomc | 1,997 | Me? | 2 |
fomc | 1,997 | From the Republic of Texas. [Laughter] | 10 |
fomc | 1,997 | President of the Republic of Texas. | 7 |
fomc | 1,997 | Just remember that we cannot take a position on political issues. [Laughter] | 16 |
fomc | 1,997 | Mr. Chairman, the Republic of Texas and the Eleventh District are much the same for all practical purposes, and they both continue to do as well as the national economy. Our job growth has been converging on the national mean for about a year, after several years of stronger growth. Positive factors contributing to the... | 939 |
fomc | 1,997 | President Parry from the Republic of California. [Laughter] | 13 |
fomc | 1,997 | Mr. Chairman, strong economic growth has continued in the Twelfth Federal Reserve District in recent months, although the pace has slowed slightly in some of the fastest growing states. During the first quarter of 1997, District jobs expanded by 3-1/2 percent at an annual rate. In the fastest growing states--Nevada, Ar... | 855 |
fomc | 1,997 | President Jordan. | 3 |
fomc | 1,997 | Thank you. First, I want to comment about your speech at NYU a couple of weeks ago. I thought it not only was very effective but also very welcome even though the wire service types still do not know the difference between nominal and real GDP. It is worthwhile to continue to press on those issues. I have grown increas... | 1,791 |
fomc | 1,997 | President Broaddus. | 5 |
fomc | 1,997 | Mr. Chairman, I will start this comment off the same way I started my comments at the last several meetings: Economic activity in the Fifth District is still very strong. The survey readings for our manufacturing and services sectors did slip a little in April, but they remained very close to the high levels to which t... | 1,234 |
fomc | 1,997 | President Boehne. | 5 |
fomc | 1,997 | Thank you, Mr. Chairman. The Philadelphia District economy generally continues to operate at high levels, although the rate of growth has moderated some in recent weeks. The more moderate growth is most notable in manufacturing and auto sales. Manufacturers generally expect a high level of activity for the balance of t... | 583 |
fomc | 1,997 | President Hoenig. | 4 |
fomc | 1,997 | Thank you, Mr. Chairman. The economy in the Kansas City District remains strong, but as others around this table have mentioned with regard to their regional economies, growth in our District has slowed a bit from the-rapid pace of late 1996 and early 1997. Manufacturing and services remain the primary engines of growt... | 795 |
fomc | 1,997 | President Guynn. | 4 |
fomc | 1,997 | Thank you, Mr. Chairman. Like everybody else, I continue to be amazed and pleasantly surprised by the strong performance of the economy and the lack of evidence of imbalances and dislocations, both regionally and nationally. Our southeastern region now looks very much like the nation as a whole after slowing a little o... | 1,215 |
fomc | 1,997 | President Moskow. | 4 |
fomc | 1,997 | Mr. Chairman, the Seventh District economy continues to expand at a modest rate, and abstracting from the effects of the strike in the automobile industry, our manufacturing sector still seems to be outperforming the nation. Our labor markets are still very tight. The unemployment rate for District states has moved dow... | 884 |
fomc | 1,997 | President Stern. | 3 |
fomc | 1,997 | Thank you, Mr. Chairman. The economy in the Ninth District remains healthy. The expansion is continuing; it remains well balanced and broadly based both geographically and by industry. There are three or four developments of relatively recent vintage that are worth commenting on. First, there was a very severe flood in... | 687 |
fomc | 1,997 | President Minehan. | 4 |
fomc | 1,997 | Thank you, Mr. Chairman. There is not a lot to report that is new about the First District. The regional economy, despite the slow-to-arrive spring weather, continues to hum along at a rather rapid pace, buoyed by solid job growth at about the national pace, which is good for our region. There are low unemployment rate... | 1,003 |
fomc | 1,997 | President Melzer. | 4 |
fomc | 1,997 | Thanks, Alan. The Eighth District economy continues to grow moderately, with firms reporting sales increases and net new hiring. Labor markets are generally tight. In March, the unemployment rate in Missouri was 4.2 percent, the lowest since 1979. District automotive production by Ford and Chrysler was up 1.1 percent i... | 958 |
fomc | 1,997 | Vice Chairman. | 3 |
fomc | 1,997 | Thank you, Mr. Chairman. Economic growth in the Second District has slowed somewhat on balance from the brisk pace reported for the first quarter. Payroll job growth remains fairly strong, with employment levels running more than 1 percent ahead of a year ago. New York State's unemployment rate held steady at 6.3 perce... | 1,058 |
fomc | 1,997 | Governor Rivlin. | 4 |
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