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fomc
1,978
I don=t think that would be a problem.
10
fomc
1,978
I think the market is expecting it, so I don=t think it=s a big problem if we do it now or early next week.
28
fomc
1,978
Would this be an aggregates [directive] or--
10
fomc
1,978
Well, let=s come to the language before we--
11
fomc
1,978
It makes some difference.
5
fomc
1,978
Yes, I can understand that.
7
fomc
1,978
Is there any significance to the fact that we would have our M1 and M2 ranges alike? It normally isn=t that way; they=d both be 5 to 10, if I understand you. Would that signal anything unusual? We=ve never done that.
55
fomc
1,978
No, I think [people might ask] to be sure it's not a misprint. [Unintelligible.]
24
fomc
1,978
I think there is some case to be made for 6 to 10 on M2. We typically have a smaller range and it seems to be growing well very recently and it would make them a little different.
43
fomc
1,978
One, two, three, four had a 6 or 6-1/2; I think your point is well taken. Let me come to the language for a moment and then I=ll come back to those numbers. I would first like to find if there=s a sentiment--we=ve all had now a month to look at this proposed language--in favor of this language. My own sentiment obvious...
234
fomc
1,978
Mr. Chairman. I have only one problem, and that=s [with] lines 12 and 13; if that were moderated, I wouldn=t have any trouble with the rest.
38
fomc
1,978
Okay, Phil, what would you like?
9
fomc
1,978
It says: "In the short run the Committee seeks to achieve bank reserve and money market conditions consistent with the longer-run ranges for the monetary aggregates."
30
fomc
1,978
You want to take out "in the short run"?
11
fomc
1,978
What I wanted to put instead was: "In the short run...seeks to achieve...that are consistent with the expected growth rate of the aggregates."
31
fomc
1,978
To achieve bank reserve and money market conditions that are consistent with the expected growth rate of the aggregates?
20
fomc
1,978
The longer-run growth rate or the short-run?
10
fomc
1,978
Well, I=m thinking of both long and short. What bothers me about the--
17
fomc
1,978
I would expect it would be troublesome now.
9
fomc
1,978
This is a linkage to the long-run statement of objectives.
12
fomc
1,978
Well, I understand it is. But we=re really going to do what we=re saying, [and] we haven=t been doing [that].
30
fomc
1,978
That=s for sure.
5
fomc
1,978
And to say that in the short run we=re going to seek these bank reserve and money market conditions consistent with the 4 to 6-1/2 percent--
34
fomc
1,978
I know, but the problem may not be in the language. It may be in the specifications.
20
fomc
1,978
But the language says what we=re trying to do, supposedly.
13
fomc
1,978
Suppose we said "reasonably" consistent with the long term or used some qualifying word. Is that what you=re worried about?
27
fomc
1,978
Yes, that=s what I=m worried about.
10
fomc
1,978
"Expected" gets us into a bit of a problem, I think.
15
fomc
1,978
Yes.
2
fomc
1,978
It sure does.
4
fomc
1,978
The time period is just too difficult.
8
fomc
1,978
We=ve got the right words at the wrong time.
12
fomc
1,978
That=s right! We are just not doing it.
11
fomc
1,978
We=re just not doing it. And this was a directive [from] this Committee.
18
fomc
1,978
You want to say "hopes to achieve"?
10
fomc
1,978
"Moves in the direction of the longer-run ranges for the aggregates."
14
fomc
1,978
"Somewhat" in the direction.
8
fomc
1,978
"Consistent with moving toward"?
7
fomc
1,978
The problem is really more fundamental. It says that we have an objective for the year, which Mr. Coldwell says we don=t really have.
30
fomc
1,978
Come on. We just don=t do it, and we are instructing the Desk to do it.
21
fomc
1,978
Instead of changing the words, why don=t we just do it?
14
fomc
1,978
Now, that=s another good alternative.
8
fomc
1,978
That=s an alternative.
5
fomc
1,978
I=m not sure how good it is.
9
fomc
1,978
I think the only instruction to the Desk starts in line 15. The other is an expression of what the Committee thinks it=s trying to do and [then it] instructs the Desk. The Desk can operate [unintelligible] telling them about the ranges.
55
fomc
1,978
Mr. Chairman, I think all this suggests that we=re going to continue to have trouble until we get rid of the 2-month range as an operating device.
33
fomc
1,978
I agree with that, but I haven=t been able to do that yet.
16
fomc
1,978
Mr. Chairman, following what Frank says, you might consider this on lines 23 to 26 in an effort to downplay the importance of the short-term ranges. Instead of saying in the June-July period M1 and M2 in the following ranges of tolerance, can we say in the June-July period M1 and M2 in the annual ranges established in ...
110
fomc
1,978
The problem, Larry, is that the 2-month range is largely dictated by what happened in the first month. It has nothing to do with the long-term ranges.
34
fomc
1,978
It=s already finished.
5
fomc
1,978
We ought to go to a 3-month range.
11
fomc
1,978
Yes. MR. MAYO(?). I vote for that.
13
fomc
1,978
I think you complicate it, Larry, because your instruction goes on to say that you look at these in deciding whether to move [the funds rate] within [its range]. You can=t go back and look at both. Let me do this with those who are voting members: Just by a show of hands temporarily indicate--I=m not freezing this lang...
149
fomc
1,978
This has been in [the directive].
8
fomc
1,978
Forever. Is this the time to [change it]?
11
fomc
1,978
This isn=t a change.
6
fomc
1,978
This is the same kind of language we=ve been using all along, isn=t it? I agree with you that we haven=t been meeting it. I=ve always read into it that longer run means beyond a year even.
47
fomc
1,978
It seems to me that if we=re not doing it, we ought to change the range. I mean that=s--
24
fomc
1,978
Yes.
2
fomc
1,978
Well, we ought to raise the range of M1--that=s the truth--or get rid of it. We have given our staff an impossible task to fit economic reality in ranges that are inconsistent with it. That=s what we have been doing.
51
fomc
1,978
You really don=t deal with the problem by fiddling with the sentence.
15
fomc
1,978
You might change it to "reasonably consistent." You probably ought to have that in there in the first place.
23
fomc
1,978
I think we=re in some danger of talking ourselves into a change in policy. I wouldn=t give up the one-year ranges quite that easily even though they are unrealistic.
34
fomc
1,978
We ought to change them to be realistic, but we can't even do that right now. We don=t even consider it until next month unless--
29
fomc
1,978
It=s a modification, Mr. Chairman, but I think I=d be willing to buy it with "reasonably consistent."
25
fomc
1,978
All right. Does that offend anybody?
8
fomc
1,978
Or does "broadly" offend anybody?
10
fomc
1,978
"Broadly consistent"?
5
fomc
1,978
Broadly? Generally? That=s an even better word. SEVERAL. Broadly.
19
fomc
1,978
We bought broadly. Anybody else?
7
fomc
1,978
I have an editorial [suggestion]. It says "weekly average federal funds rate," which just has a degree of precision that--
26
fomc
1,978
What would you like?
5
fomc
1,978
Just take out "weekly average."
7
fomc
1,978
Does that mean daily average? I just want to be sure I understand, President Volcker, because that weekly average was in there to give day-to-day flexibility and--
34
fomc
1,978
I don=t want to eliminate the day-to-day flexibility but I don=t like the implication. I don=t want [the Desk] to move on a Wednesday just to get the weekly average.
39
fomc
1,978
Do you want to take the word "weekly" out and leave "average" in?
18
fomc
1,978
Leave average in. Maybe that would--
8
fomc
1,978
Steve?
2
fomc
1,978
Average of what? A monthly average?
8
fomc
1,978
So the Desk isn=t tied each day [to a] target; when it changes it would be an average--
23
fomc
1,978
When you say "initially" keeping the average funds rate you can=t mean [the average over] three months. What do you want to do? Leave "weekly" in or take it out? How many want to leave it in? [Pause] How many want to take it out? The "ins" have it. On page 2 we have to jot in some figures later. And if we decide on lin...
146
fomc
1,978
I=m not sure the question was clear to some.
11
fomc
1,978
This says "giving approximately equal weight to M1 and M2 if their rates of growth appear to be"--and you have a choice--"significantly above" or "significantly below" their midpoints. That=s one choice. The second choice is "close to or beyond" the upper or lower limits. Normally, I would prefer 27 but in the touchy s...
178
fomc
1,978
Mr. Chairman, if I might add: If the Committee adopts this form of a directive, the staff would anticipate providing these two alternative languages each time just as it provided a money market directive and an aggregates directive.
43
fomc
1,978
Sure. Last month I would have preferred line 27; this month I prefer line 28 because I think we are going to have a very tough time operating--
33
fomc
1,978
Have we set the upper limit on--
8
fomc
1,978
No, that=s the point. That=s why I wanted to get this settled first and then you=ll decide on--
25
fomc
1,978
I can see the rate then staying put while the aggregates move and then comes the moment for their [unintelligible] when they have to take a jump. That=s not a happy situation.
40
fomc
1,978
In a range of 7-1/2 to 8 on the funds rate with a 7-3/4 percent midpoint, what=s the jump? If the jump is up a quarter or down a quarter--
45
fomc
1,978
At that point we might have a consultation to do another 1/4 so that the whole move then would be 1/2 and we might not have the courage to do that. I=d rather let the market do it for us.
49
fomc
1,978
I will still put the question to you. Line 27 now is operating off the midpoint. How many prefer that? One, two--no, we have to have voting members only. One, two, three, four, five. How many prefer line 28? One, two, three, four, five. Who=s missing?
69
fomc
1,978
One of the Board members.
6
fomc
1,978
That only makes 11.
6
fomc
1,978
I=ll call the roll. That=s easier. Just say 27 or 28. Ernie Baughman 27 Phil Coldwell 27 Dave Eastburn 27 Steve Gardner 28 Phil Jackson 28 Bill Miller 28 Chuck Partee 28 Paul Volcker 28 Henry Wallich 27 Mark Willes 27 Willis Winn 27 All right, 27 won, so 27 we=re going to use. That=s simple. It=s a very democratic proc...
168
fomc
1,978
Yes, I would feel with an aggregates directive that I would need 5 to 11.
19
fomc
1,978
Mr. Chairman, I had moved [my ranges] in a lower direction because mine were predicated on being able to go as far as 8-1/4.
35
fomc
1,978
All right. How many would prefer 5 to 11? Let=s just take a straw vote on that. Four of us. How many would prefer 5 to 10? One, two, three, four. And how many would prefer something else?
53
fomc
1,978
Well, 5 to 9 would be stretching it a bit but I could ride there I guess.
21
fomc
1,978
Don=t give up.
5
fomc
1,978
Well, I would prefer 4-1/2 to 8-1/2.
19