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fomc | 1,998 | That is the G-10 weighted average? | 9 |
fomc | 1,998 | Yes. | 2 |
fomc | 1,998 | On that average, the dollar is about one percent higher than it was at the time the Greenbook went to press. | 24 |
fomc | 1,998 | That's against the other G-10 currencies, but it is up less than that presumably against some of the other weighted averages. It does not change the basic picture. | 33 |
fomc | 1,998 | The recent appreciation is still noise as far as the Greenbook forecast is concerned? | 16 |
fomc | 1,998 | Absolutely, in our view. | 6 |
fomc | 1,998 | Supposing the fiscal year surplus number comes in closer to the New York Bank's estimate than ours. That would seem to be outside the noise range in terms of the implications for fiscal drag. What kind of response would you have if we accepted their numbers for receipts? What happens? | 56 |
fomc | 1,998 | I think we need to consider what the source of that difference might be before we would characterize that as fiscal drag. We have not gotten totally inside their brains to be able to say exactly why their numbers differ from ours, but it appears that one element in the picture is, in effect, New York's expectation of m... | 278 |
fomc | 1,998 | Absolutely! I put in last year's actuals to show that the range of misses was 7 to 10 percent. That had a huge impact in dollar terms. But I was also offering that experience to provide some scale of the forecasting errors involving big numbers. If we could get Desk operations to have misses of only 10 percent over a 2... | 82 |
fomc | 1,998 | It is my understanding that the difference in the projections of the surplus for the fiscal year, which I believe is on the order of $40 billion, is mostly on the revenue side, but not all of it is there. There are the ongoing questions concerning how appropriations will play out in terms of authorizations and expendit... | 65 |
fomc | 1,998 | Do you have any rule of thumb regarding the effect of changes in crude oil prices on the core CPI--some notion of the feed-through? | 28 |
fomc | 1,998 | I cannot cite a rule of thumb off the top of my head, but in some of our models we do have terms for food and energy prices feeding through to the core CPI. We did a simulation that indicated that the effect of the downward movement in energy prices in our forecast on the core inflation rate this year is somewhere betw... | 72 |
fomc | 1,998 | It is quite substantial in other words. | 8 |
fomc | 1,998 | It is not negligible, to be sure. | 9 |
fomc | 1,998 | Mr. Chairman, we have done a little work along the same lines. Our staff has what we call the median CPI or the trimmed mean. The effects are on the order of magnitude that you suggest, Mike, from what I recall our people were saying. They are continuing work to evaluate those indirect effects. | 62 |
fomc | 1,998 | Mike, I have two questions that are somewhat related. The Greenbook stresses that labor markets are very tight and that the tightness could lead to increases in real compensation. But increases in real wages in the Greenbook forecast actually decline in 1999. For example, the ECI decelerates by .5 percentage point rela... | 156 |
fomc | 1,998 | We do not have real wages declining, but in 1999 the gap between the ECI increase and the CPI increase is smaller. We are not at all sure that that is the number to focus on. In fact, we prefer to focus on a product price measure rather than the consumer price index in looking at real wages, and it feeds through, too, ... | 442 |
fomc | 1,998 | Related to a point that you made in your comments about the anecdotal data pertaining to inflation and how they might be at variance with some of the published statistics, might that be related to the fact that the anecdotal data reflect what people see? The CPI certainly includes the effect of technical adjustments. M... | 115 |
fomc | 1,998 | I am not sure about the ability of John Q. Public to filter out all the cumulative changes from the 1994 approach to measuring consumer prices to the method used in 1999. | 38 |
fomc | 1,998 | They never see it except when they read about it. | 11 |
fomc | 1,998 | In the world of instantaneous flows of information, all the economists will be talking about it and maybe it will filter out into the real world to some degree. I guess we are not totally persuaded one way or the other on this. We are inclined to think that in terms of formal cost of living adjustments and, more inform... | 390 |
fomc | 1,998 | Thank you. | 3 |
fomc | 1,998 | President Moskow. | 4 |
fomc | 1,998 | Mike, you mentioned that oil prices are one of the temporary factors that are affecting inflation; in fact oil prices are even affecting core CPI. The other key factor, of course, is the dollar. I'm wondering if you've done any simulations or have any quantitative estimates as to what the impact of the stronger dollar ... | 73 |
fomc | 1,998 | President Moskow, our model estimates suggest an effect of about 1/4 percentage point per year over the last couple of years on core CPI from the lower nonoil import prices, simulating forward from 1995. | 45 |
fomc | 1,998 | Does that include 1998? | 7 |
fomc | 1,998 | Yes, there may be another quarter percentage point or so for 1998. | 16 |
fomc | 1,998 | This is an area in which economic science has not given us anything that we want to stake our lives on. We have various results with the various models, but I think we are persuaded that the appreciation of the dollar has had a significant effect. Looking at what is going on in the goods markets, I think the evidence i... | 108 |
fomc | 1,998 | Thank you. | 3 |
fomc | 1,998 | We do have a bit of a lag built in between the exchange rate change and the effect on import prices. So, even if the dollar starts coming off its current level, we will see some effects in terms of lower nonoil import prices for a little while. | 53 |
fomc | 1,998 | President Jordan. | 3 |
fomc | 1,998 | Mike, you correctly anticipated a question that I had, but in at least one respect your presentation added to a puzzle that I had when I read the Greenbook and some of the other materials. You have personal income growth picking up to a 6.7 percent rate in the first quarter from a relatively robust pace last year and i... | 178 |
fomc | 1,998 | All of that reflects the arithmetic that I described at the outset as to how we have added up the GDP components. There is the tension between the labor input indicators and what we can add up on the expenditures side. We've seen this before. We will see it again. It leaves a lot of room for surprise, but we have recon... | 176 |
fomc | 1,998 | Let us suppose it is true that real GDP growth in the first quarter, as you have added it up, is a smaller number than that for the fourth quarter. In the face of all these other indications of strength, do we really want to characterize the economy in the first quarter as a weakening in economic activity even though t... | 83 |
fomc | 1,998 | This is a policy issue on which I have no expertise. You are asking whether I am comfortable with that? I guess what you are saying is that the characterization of economic activity need not be a reference to GDP growth per se, because the latter may not capture the sense one has of the vitality of the economy in the f... | 93 |
fomc | 1,998 | Let me take you to the productivity issue then. Nothing that any of us hears anecdotally when we talk to people or other evidence that we can look at would support your first-quarter productivity estimate. I understand how it is derived and why you wind up with this negative productivity number, shocking as it is. It i... | 68 |
fomc | 1,998 | Can we stipulate that measured productivity is distinct from true productivity? | 13 |
fomc | 1,998 | Somehow statistically arrived at! When I was talking to Don Kohn last week, he told me that the decline did not happen and that productivity probably rose by, say, 2 percent. Starting with that presumption, what else has to change in your forecast if you are forced to put in a positive productivity number for the first... | 80 |
fomc | 1,998 | If we talk about it simply from a straight arithmetic point of view, obviously we would have to find some more expenditures. Where might we find them? It could be in any number of places. One could conceive that, despite what looks like a very strong consumer expenditure number in the first quarter, people really have ... | 123 |
fomc | 1,998 | So you would be raising not just the real output number but the nominal GDP? | 16 |
fomc | 1,998 | In the end, BEA is only going to publish a number that adds up on the expenditure side, and the productivity numbers are measured that way. So, that is how we are going to have to get there. We have only one month of data for net exports and that is a volatile number, so we could be surprised there. Over the past year ... | 179 |
fomc | 1,998 | When you try to reconcile the data and make them consistent on the income side, is your negative productivity number tied in with the decline in corporate profits that you're showing? | 33 |
fomc | 1,998 | Again, arithmetically it is. Certainly, what we have in this forecast for 1998 in essence is a story where unit labor costs are increasing more rapidly because of the lagging adjustment of labor input to the deceleration in output. Weaker productivity means weaker profits. | 57 |
fomc | 1,998 | You can imagine what it's like when we are out around our Districts talking to people and we tell them that productivity is going down, profits are really bad, but employers are hiring workers in large numbers because they are earning income and spending a lot of money. Something just goes "clunk" in that logic; it sim... | 71 |
fomc | 1,998 | I think they have been hiring people in part because business has been very good and they expect business to continue to be good. On the basis of the anecdotal reports, firms have had such a difficult time finding workers that they're probably still catching up to some degree. That may be one of the reasons the workwee... | 226 |
fomc | 1,998 | As a statistical matter, President Jordan, there are a couple of quirks in this minus 2.2 percent productivity number that we have for the first quarter. One relates to the fact that we think the 10- and 11 -day pay period seasonal adjustment problem has led to an artificially large increase in hours worked in the firs... | 126 |
fomc | 1,998 | Any further questions for the gentlemen? | 7 |
fomc | 1,998 | Mike, I have the impression that the possibility of a stock market decline is playing a larger and larger role in the projected deceleration of the expansion. I would be interested in some sort of quantitative relationship here. Are you expecting a permanent drop in the market? Is it something that is going to be exten... | 120 |
fomc | 1,998 | It could be less. I apologize if word about what we are assuming did not get to you. We have a 10 percent decline in the market from its level last week to the end of the year and we then have a flat market in 1999. So, in comparison to what we've seen in the past few years, which as I recall were a couple of close-to-... | 215 |
fomc | 1,998 | Further questions? If not, would someone like to start the roundtable? President Jordan. | 18 |
fomc | 1,998 | Thank you. When I left the meeting in early February, we were waiting for the East Asian effects to get here, and as I tried to analyze their likely impact I felt like someone who was trying to anticipate what would be the effects of an asteroid or a comet that supposedly was going to show up one of these days. A coupl... | 1,400 |
fomc | 1,998 | President Parry. | 4 |
fomc | 1,998 | Mr. Chairman, Twelfth District economic growth accelerated in 1997, led by a surging California economy. We believe that the District economy entered 1998 with considerable momentum. Recently revised figures show that growth in California payroll employment jumped to 3.8 percent in 1997, about a percentage point greate... | 729 |
fomc | 1,998 | President Moskow. | 4 |
fomc | 1,998 | Thank you, Mr. Chairman. The pace of economic expansion in the Seventh District has picked up since the beginning of the year. Mild winter weather explains part, but not all, of the reported strengthening in retail sales and our very robust housing market. In contrast to the slowing seen in the nation, expansion in our... | 940 |
fomc | 1,998 | Mike, excuse me, but what were your academics saying a year ago? | 15 |
fomc | 1,998 | Several were saying the opposite a year ago. It was much more of a mixed picture, with some saying that we should be tightening and others indicating that things were just fine and we should not change our policy. But for the first time at the latest meeting, they were virtually unanimous in the view that some tighteni... | 73 |
fomc | 1,998 | President Boehne. | 5 |
fomc | 1,998 | Thank you, Mr. Chairman. The economy in the Philadelphia District is growing at the same rapid pace as last year. Job growth has expanded to all sectors including manufacturing, which had been a drag on the regional economy. Labor markets are very tight. Compensation costs are rising, but apparently so is productivity ... | 487 |
fomc | 1,998 | President Guynn. | 4 |
fomc | 1,998 | Thank you, Mr. Chairman. I would characterize the overall growth of our region's economy as moderate, at least by our District's standards, in that growth in our region has fallen back to national trends in the last several quarters after leading the nation through the early years of this expansion. With a couple of no... | 1,180 |
fomc | 1,998 | President Hoenig. | 4 |
fomc | 1,998 | Thank you, Mr. Chairman. The economy in the Tenth Federal Reserve District remains quite healthy. It appears to be growing at a faster rate than the nation so far this year. For example, we estimate that total employment rose at an annual rate of 7 percent in the first two months of 1998, quite a bit faster than the in... | 770 |
fomc | 1,998 | President Minehan. | 4 |
fomc | 1,998 | Thank you, Mr. Chairman. The economy in New England continues to be strong. Actually, on the basis of revised benchmark data, it is a little stronger than we thought it was in 1997 and early 1998. Tight labor market conditions prevail, as do strong real estate markets in most areas, and good, if not great, prospects fo... | 1,013 |
fomc | 1,998 | President McTeer. | 5 |
fomc | 1,998 | After a year of exceptionally strong economic performance in 1997 and into 1998, the economy of the Dallas region has recently begun to show some signs of softening, or at least expectations and early hints of softening. Lower oil prices, the effects of the Asian crisis, and continued labor market tightness are key fac... | 777 |
fomc | 1,998 | President Broaddus. | 5 |
fomc | 1,998 | In keeping with most of the other comments around this table--] guess Bob McTeer's comments are an exception today--our District economy seems by all accounts to have remained very strong. There are some indications in the manufacturing sector that shipments may be softening a bit, but orders remain quite strong. Like ... | 961 |
fomc | 1,998 | President Stem. | 3 |
fomc | 1,998 | Thank you, Mr. Chairman. Let me start by commenting on three or four characteristics of the District economy, some of which are by now familiar and some perhaps less so. I will then talk a little about the national economy. With regard to the District, nearly all sectors of the regional economy remain very strong. For ... | 144 |
fomc | 1,998 | Are you going to answer that question? | 8 |
fomc | 1,998 | I think part of the explanation is that people are taking second and even third jobs. I wasn't going to get into the anecdotal competition on this. [Laughter] We do hear stories about places like Mall of America that are sufficiently desperate that they will hire a worker, if they can find one, who for whatever reason ... | 691 |
fomc | 1,998 | Why don't we take a break because if we go through the rest of the speakers, we will have our coffee break after lunch! Let's allocate 10 minutes. | 32 |
fomc | 1,998 | As in most of the rest of the country, conditions in the Eighth District are strong and labor markets are very tight. The unemployment rate in the Eighth District is actually a bit below the national average. Rather than repeat the kinds of anecdotes we have heard before along those lines, I would like to emphasize my ... | 663 |
fomc | 1,998 | Governor Rivlin. | 4 |
fomc | 1,998 | I think the FOMC is in a difficult spot though I don't expect we will get much sympathy. [Laughter] Our difficulties, as Bill Poole just pointed out, stem not because anything bad is happening but precisely because so little bad is happening. The economy is performing as well as it ever has and probably as well as any ... | 796 |
fomc | 1,998 | Governor Meyer. | 3 |
fomc | 1,998 | Thank you, Mr. Chairman. I want to focus on three aspects of continuity in the developments since the last meeting. First, there has been continued exceptional momentum in private domestic demand and payroll employment, only partially offset by a decline in net exports. Second, the strength in domestic demand has conti... | 1,126 |
fomc | 1,998 | Governor Gramlich. | 4 |
fomc | 1,998 | Thank you, Mr. Chairman. This is my fourth meeting. At the previous three, I felt rather confident in my advice, and I'm afraid I am now joining the cold feet crowd. Let me first make a few comments on the Greenbook forecast and then a few on policy strategy. On the Greenbook, there is a big change in the forecast from... | 915 |
fomc | 1,998 | Governor Ferguson. | 3 |
fomc | 1,998 | Thank you, Mr. Chairman. During the coffee break, President Boehne suggested that he had relatively little to say this time around because he had such a short distance to travel. My office is the nearest to this room, short of the Chairman's, so I will have even less to say this time. Let me observe, as others have, th... | 630 |
fomc | 1,998 | Vice Chair. | 3 |
fomc | 1,998 | Mr. Chairman, the Second District is doing so well that I will not spend any time commenting on it. We have reached a point of prosperity in New York City that has led the Mayor to decide that we should now spend most of our time being nice to one another. On the national level, what do we know now that we did not know... | 738 |
fomc | 1,998 | Governor Kelley. | 3 |
fomc | 1,998 | Thank you, Mr. Chairman. We are reaching the time of the day when all has been said. Between the briefings and the excellent comments that we have heard around the table this morning, I think we have a good understanding of where the economy is and what the issues are, and I'm not going to repeat all of that. Let me ju... | 596 |
fomc | 1,998 | Governor Phillips. | 3 |
fomc | 1,998 | Thank you, Mr. Chairman. The expansion is now entering its eighth year. The situation is starting to feel a bit surreal, perhaps even unbelievable. Every facet of the U.S. economy is surprisingly strong. GDP output continues to expand briskly. Housing activity is up. The labor market remains extremely tight, yet employ... | 787 |
fomc | 1,998 | Thank you very much. I will now call on Don Kohn. | 14 |
fomc | 1,998 | Thank you, Mr. Chairman. Governor Phillips and a number of others mentioned money growth in their presentations, and I thought this might be one of those infrequent occasions when discussion of this subject would be helpful. I will begin with some comments on the surprising strength in money growth and use that as a le... | 2,401 |
fomc | 1,998 | Questions for Don? If not, let me get started. It is quite evident, as Governor Rivlin said, that the performance of this economy is about the best that we can possibly imagine. I suspect that I have been watching the economy longer than anyone around this table, so I can confirm that statement in terms of personal obs... | 2,490 |
fomc | 1,998 | Mr. Chairman, I support your proposal. I think it would be unwise to change our policy today, but what you have said and the general tenor of the comments around the table convince me that we will not hesitate to move when the evidence is somewhat more clear that that is the appropriate thing to do. For now, I believe ... | 79 |
fomc | 1,998 | President Parry. | 4 |
fomc | 1,998 | Mr. Chairman, I certainly support your recommendation of no change at the present time and I very enthusiastically support the move to asymmetry. It seems to me that the discussion strongly supports such a move. I have a question. It relates to my recollection that when we talked about how we were going to handle the p... | 195 |
fomc | 1,998 | That is an interesting question. I would appreciate hearing other comments on that. Vice Chair, do you have a comment? | 24 |
fomc | 1,998 | If the economy continues to move in this direction between now and the next meeting, I think that we would have to begin preparing the way. I do not object to what Bob Parry is suggesting. Marginally, I would prefer that you do it in a policy speech. | 56 |
fomc | 1,998 | That would be my inclination. The reason I would feel uncomfortable with a short press statement is that we could not leave it at that. The question would remain as to why we did it. If it appears that economic developments are beginning to move us toward a policy change, I think we will have a lot more to explain. I m... | 167 |
fomc | 1,998 | Mr. Chairman, I can appreciate the viewpoint that Bill McDonough expressed, and I can understand that there may be opportunities for you to lay that foundation. It is obvious that if we do not change our current procedure, then going to asymmetry does not accomplish what we want. Asymmetry would serve to alert the publ... | 81 |
fomc | 1,998 | President Boehne. | 5 |
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