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fomc | 1,997 | I have a follow-up question based on some of the conversations at the conference. It was rather striking to a few people there, as it probably is to a lot of people in this room, that as compared with our involvement with Mexico and in IMF packages in general, there was no specific U.S. involvement in the Thai baht sit... | 141 |
fomc | 1,997 | With respect to the baht? | 7 |
fomc | 1,997 | Yes. | 2 |
fomc | 1,997 | Ted, why don't you take a minute and review that. | 12 |
fomc | 1,997 | I think there are two points to be made. One--about which it would seem appropriate to inform the Committee in any event--is that the United States government was very concerned about this from the beginning. In fact, this issue came up last March and I think it is fair to say, as Governor Meyer can attest based on mee... | 811 |
fomc | 1,997 | Ted, have you had any discussions either with the Peoples Bank of China or the Hong Kong Monetary Authority about the political commitment to peg the Hong Kong dollar? It would seem to me that there would be a lot of vulnerability associated with making any change very soon. | 52 |
fomc | 1,997 | I think everybody in the room has heard in one form or another that they have a very strong political commitment. I was referring to the future. At this point, it seems to me that it would be very difficult for them to abandon the current policy. The Hong Kong dollar may be under considerable tension right now, but the... | 256 |
fomc | 1,997 | Ted, in the Mexican bailout, we gave them money to refinance their tesobonos, their dollar-guaranteed debt. What is the money being loaned to Thailand to be used for? | 39 |
fomc | 1,997 | You can use the word "bailout," but I am not allowed to. The financial situation in Thailand is in some respects much more problematical than was the case in Mexico. They have something on the order of $38 billion in short-term obligations. Most are bank obligations, of which more than half are to Japanese banks. They ... | 549 |
fomc | 1,997 | Any further questions? President Melzer. | 8 |
fomc | 1,997 | Alan, I just want to make an observation on another issue for Peter. We are a fairly substantial holder of inflation-indexed Treasury securities in our portfolio, 5 percent of the outstandings or something like that. Looking down the road, as those securities become more useful as guides to monetary policy in terms of ... | 176 |
fomc | 1,997 | That's a very good thought. Let me make a few observations for the benefit of the whole Committee. First, we are treated as an "add-on" in the Treasury's issuance at the long end, so our purchases do not reduce what the Treasury issues to the public. Whether to buy such obligations at all was a bit of a dilemma for us.... | 188 |
fomc | 1,997 | That occurred to me. | 5 |
fomc | 1,997 | But as I noted, we are not a net subtractor of market supply because the Treasury treats us as an "add-on." An additional reason for holding some of these securities was to have them available for our securities lending program. You inspired me to comment on that program at an earlier meeting, and I have told the Commi... | 118 |
fomc | 1,997 | Is there going to be a forward market in those securities? | 12 |
fomc | 1,997 | Not that I'm aware of. | 6 |
fomc | 1,997 | I recently heard discussions concerning possible futures contracts. | 9 |
fomc | 1,997 | The Board of Trade is reviewing the feasibility of such contracts. | 12 |
fomc | 1,997 | Yes, the Board of Trade is considering those, but when you said "forward" I thought about the over-the-counter forward market. | 27 |
fomc | 1,997 | "Forward" is a more generic term. | 9 |
fomc | 1,997 | The futures market is what the Board of Trade is working on. | 13 |
fomc | 1,997 | We could always hedge our position. [Laughter] | 11 |
fomc | 1,997 | As long as we publish our forward position, Mr. Chairman! | 13 |
fomc | 1,997 | As a footnote? [Laughter] | 9 |
fomc | 1,997 | There are futures markets in both the 5-year and the 10-year issues. Those issues are eligible to trade in those markets, but as of a week ago there had been essentially no trades--a few trades in the 10-year bond--and no positions. I believe the markets also obtained permission to trade options on the futures contract... | 98 |
fomc | 1,997 | It's a complicated issue, but one that I believe is worth continuing to think about. | 17 |
fomc | 1,997 | There is an anomaly in the central bank buying inflation-indexed bonds for its portfolio. Any further questions for Peter? I'm going to need a motion to ratify the actions of the Domestic Desk. | 39 |
fomc | 1,997 | Move approval. | 3 |
fomc | 1,997 | Second. | 2 |
fomc | 1,997 | Without objection. Thank you very much. Mike Prell, you are on. | 16 |
fomc | 1,997 | Thank you, Mr. Chairman. In the opening sentence of the Greenbook, we characterized the economy as continuing "to hum along in recent months." As of last Thursday, we were able to report that hiring remained strong and that high-spirited consumers were once again spending heavily at auto dealers and other retail outlet... | 1,285 |
fomc | 1,997 | The information that I heard on the radio this morning on the UPS agreement may or may not be correct, but it suggested wage increases of 5 or 6 percent. Since the firms that compete with UPS are, to my understanding, all non-union, is there a possibility that the wage cost change could result in a competitive situatio... | 118 |
fomc | 1,997 | I don't think we know enough to answer that question at this point. It does appear that the gains for full-time UPS workers may not be spectacular in terms of hourly wages. I don't have a very good fix on what the part-time workers received. | 50 |
fomc | 1,997 | I heard $4 an hour over 5 years on an $11 base. | 16 |
fomc | 1,997 | I saw those figures and I'm not sure to whom they apply or whether the reference is to the minimum wage or some other measure. | 26 |
fomc | 1,997 | I think it applies to the average wage. | 9 |
fomc | 1,997 | In that case, it would seem that there have been some significant gains. | 15 |
fomc | 1,997 | It is interesting that the head of the Teamsters Union was acknowledging that there would be job losses. The implication was that UPS will convert 20,000 part-time jobs into 10,000 full-time jobs. | 43 |
fomc | 1,997 | The company has been saying that they probably would lose some market share, at least for a time, because many firms would no longer want to rely solely on UPS. This strike is going to be a fundamental problem for them, at least until they can rebuild confidence among their customers. I have not heard the assertion tha... | 146 |
fomc | 1,997 | This is a labor intensive activity is it not? | 10 |
fomc | 1,997 | At least at the distribution centers. | 7 |
fomc | 1,997 | To a considerable extent, yes, but there is also a lot of capital investment involved, particularly in the rapidly growing area of second-day service that UPS has developed. That is part of the story behind the changing employment mix. In order to implement this rapid delivery service, they needed to have a lot of peop... | 151 |
fomc | 1,997 | Mr. Chairman, a directly related development, at least in the New York area, has been the reaction of UPS competitors. When some shippers asked those competitors to provide a delivery capability, rather than increasing prices the competing firms asked for a two- or three-year agreement to assure the continuation of the... | 78 |
fomc | 1,997 | This could turn out to be a quite counterproductive labor contract for the Teamsters if a lot of events go in the wrong direction. They could end up with a significant loss of total jobs not only as the result of the conversion from part-time to full-time work, but also through a significant loss of market share becaus... | 122 |
fomc | 1,997 | Unless their negotiating success leads to greater organizing success in some of the non-union companies. | 18 |
fomc | 1,997 | One would assume that to be the result unless there emerges a perception that works against the union organizers and reduces their ability to unionize more companies. It is in part a question of timing as far I am able to tell. President Parry. | 49 |
fomc | 1,997 | Mike, I wanted to ask you a question about inflation forecasts that in the view of some have become particularly unreliable recently. We did an exercise--an out-of-sample forecast--that looked at the inflation forecast in our model. As one would have expected, it turned out that we were overestimating inflation, but th... | 167 |
fomc | 1,997 | I do not think, given the standard errors across most models, that one would say that the price equations have uniformly broken down. And I emphasize "equations." We tend to look at an array of models in our forecast work. Some perform better than others. Not surprisingly, the inclusion of import prices as one of the v... | 171 |
fomc | 1,997 | It strikes me as interesting that if we wanted to make a point that we are in some new era, we would not use these equations to support that conclusion. | 32 |
fomc | 1,997 | President Stern. | 3 |
fomc | 1,997 | Mike, I understand that you are assuming a significant decline in equity values next year. How important is that to your view of how things are going to transpire? | 33 |
fomc | 1,997 | As we emphasized, applying the normal lags that we found in estimating consumption functions with wealth terms, the time profile and dimension of the stock market movement that we have assumed suggest that we would not get much of a retardation in consumer spending from that drop in stock prices before the end of 1998.... | 161 |
fomc | 1,997 | President Moskow. | 4 |
fomc | 1,997 | Mike, I want to ask you about spending for durable equipment, particularly for technologically oriented durable equipment. The Greenbook says that this sector has become less cyclical, and I have two questions about this. One, I assume you mean it has become less cyclical since the last recession. And, second, I was wo... | 94 |
fomc | 1,997 | I don't want to convey the notion--and I hope we didn't state it quite that way--that we believe the durable equipment sector is systematically less cyclical than it might have been in the past. Our assessment at this juncture is that there seem to be in train some changes in technology of a dimension such that the dem... | 296 |
fomc | 1,997 | President Minehan. | 4 |
fomc | 1,997 | You noted the dependence of your forecast on the assumption about inventories. Is there any way of knowing how much of this inventory accumulation is domestically produced versus imports? | 32 |
fomc | 1,997 | We saw considerable strength in imports in the second quarter in a number of categories in the consumer goods and machinery areas, and that suggests that imports may have contributed to the very substantial increase in inventories in that period. As we look to the third quarter, we anticipate that some of the fallout i... | 75 |
fomc | 1,997 | We do estimate a synthetic split in inventories between domestic and imports. My recollection, and I may be wrong on this, is that the inventory accumulation that occurred in the second quarter was predominantly in domestically produced goods. | 44 |
fomc | 1,997 | I don't recall whether there was any significant change in trends in those estimates. | 15 |
fomc | 1,997 | I don't think it was a trend; I think it was a second-quarter development. I will check on this and report on it when I get the information. | 32 |
fomc | 1,997 | We do not yet have the June trade data. Taking the inventory data to give us a hint about what is going to happen to the trade data, one would expect imports to tail off. That would occur especially in the consumer area because we saw such a big rise in imports of consumer goods in April and May. Understanding all of t... | 112 |
fomc | 1,997 | There is, of course, a lot of noise in the data when we move from the trade account to inventories. | 23 |
fomc | 1,997 | There has been some shift in the seasonal factors over the years and to some extent earlier this year, especially in the consumer goods area. One would not expect Christmas to come in April, if I may put it that way. It is not clear to what extent the seasonal adjustments may have become unreliable, but it would not be... | 83 |
fomc | 1,997 | Further questions for Mike? If not, who would like to start the Committee discussion? | 17 |
fomc | 1,997 | Mr. Chairman, the Eleventh District economy, like the national economy, has been exceptional. I guess most of you saw the notice from the Shadow Open Market Committee. For the first time since 1974, they are going to skip a meeting, and the reason they gave was that policy and the results of policy have been so good th... | 698 |
fomc | 1,997 | President Minehan. | 4 |
fomc | 1,997 | Mr. Chairman, the New England economy-- | 9 |
fomc | 1,997 | You have to label yourself before you go on. | 10 |
fomc | 1,997 | Oh, okay. I have to think about that. | 11 |
fomc | 1,997 | Peter has set up a little box for each of us. | 12 |
fomc | 1,997 | I hate to call myself old anything. [Laughter] I think I'll wait on that. The New England economy continues to expand steadily. Employment growth is roughly the same as that for the nation, and it is above New England's long-term trend. Massachusetts is a star performer, while Rhode Island lags behind. The retail secto... | 898 |
fomc | 1,997 | President Moskow. | 4 |
fomc | 1,997 | Thank you, Mr. Chairman. Our regional economy continues to expand at a modest rate, though growth in the District seems to be slower than that for the nation due in part to labor supply constraints. As I have been reporting for some time, our labor markets are very tight, with lower unemployment rates and higher employ... | 917 |
fomc | 1,997 | President Parry. | 4 |
fomc | 1,997 | Mr. Chairman, the Twelfth District's rapid economic expansion has actually gained momentum in recent months. Payroll employment grew by 3.2 percent at an annual rate in the second quarter. Growth in durable manufacturing employment accelerated between the first and second quarters as Boeing's expansion combined with th... | 661 |
fomc | 1,997 | President Hoenig. | 4 |
fomc | 1,997 | Thank you, Mr. Chairman. As far as our District goes, not a great deal has changed since our last meeting, so I will summarize developments and highlight a couple of them for you. Generally, we have a robust economy that is growing modestly; we have strong production and increased sales overseas. Our manufacturing sect... | 535 |
fomc | 1,997 | President Guynn. | 4 |
fomc | 1,997 | Thank you, Mr. Chairman. The economic picture and outlook for the Southeast also have not changed very much over the last seven weeks. We still have a very favorable and balanced picture, mirroring and reinforcing what we see at the national level. The Southeast is still "humming along," Mike. Picking up on Cathy Mineh... | 787 |
fomc | 1,997 | President Broaddus. | 5 |
fomc | 1,997 | Thank you, Mr. Chairman. The central question on the economy that we face this morning is much the same as the question we faced at the last meeting and at earlier meetings: Is demand reviving as we move into the third quarter or not? At our Bank, we tried to analyze the recent information and data that we have receive... | 1,003 |
fomc | 1,997 | President Stem. | 3 |
fomc | 1,997 | Thank you, Mr. Chairman. Conditions in our District have not changed much in years in the sense that the moderate and steady expansion that has been under way continues. Employment has continued to grow and there are some anecdotal indications that employers are going to new extremes to find workers. Construction activ... | 372 |
fomc | 1,997 | President Boehne. | 5 |
fomc | 1,997 | Thank you, Mr. Chairman. The pace of economic activity in the Philadelphia District is picking up somewhat in the third quarter after moderating in the second. Labor markets are tight, with some upward pressure on wages. Businesses, however, are still finding ways to offset higher wage costs. Inflationary pressures the... | 256 |
fomc | 1,997 | President Melzer. | 4 |
fomc | 1,997 | Thanks, Alan. The Eighth District economy is still growing at a moderate pace. District firms report continued growth in sales and employment, although tight labor markets throughout the District are a limiting factor. Average unemployment, at 4.4 percent, remains below the national rate. District payroll employment, w... | 916 |
fomc | 1,997 | Vice Chair. | 3 |
fomc | 1,997 | Mr. Chairman, the Second District economy continues to underperform the nation's to some extent, but it has been doing somewhat better. The region's labor markets remained steady in the second quarter. New Jersey's unemployment rate edged down to 5.4 percent in July, reversing its little uptick in June, but it is down ... | 806 |
fomc | 1,997 | Governor Kelley. | 3 |
fomc | 1,997 | Thank you, Mr. Chairman. In the seven weeks since we last met, I have been doing my best to search the data and read and listen as carefully as I could to see if I can come up with any convincing information that indicates things are beginning to change. Other than various straws in the wind, I just cannot find any. Th... | 347 |
fomc | 1,997 | Governor Rivlin. | 4 |
fomc | 1,997 | I have always been an optimist. I think I was born that way, but I find myself stuck between the old and the new paradigms at the moment and not helped very much by the flow of data. The good features of this economy have been emphasized by all of us for several meetings in a row. I believe we are now beyond the point ... | 681 |
fomc | 1,997 | Governor Meyer. | 3 |
fomc | 1,997 | I definitely identify with the old paradigm, albeit with an updated estimate of NAIRU. [Laughter] | 22 |
fomc | 1,997 | The first mention of NAIRU today! | 9 |
fomc | 1,997 | But I am at least an old paradigm with a new NAIRU. I recently have become more optimistic about the near-term outlook in response to data indicating much larger than expected inventory building in the second quarter, continued favorable inflation news, and the further appreciation of the dollar. These developments sug... | 1,105 |
fomc | 1,997 | Governor Phillips. | 3 |
fomc | 1,997 | Thank you, Mr. Chairman. We did get our second-quarter slowdown, but the signs are now consistent with the continuation of the slower growth or the resumption of somewhat above-trend growth. So, it seems to me that the challenge for the Committee is to assess the strength of the economy's momentum and the related prosp... | 720 |
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