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1,998
Thank you, Mr. Chairman. Economic growth in New England continues to be strong. Employment is growing at about the same rate in our region as in the nation, while the unemployment rate is more than 1/2percentage point lower. Massachusetts leads the region in job growth, outstripping the national rate, and Maine and Con...
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President Parry.
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Mr. Chairman, the pace of economic growth in the Twelfth District has remained strong in recent months, and some of the tightness in local labor and housing markets is showing through to wages and consumer prices. In Arizona, the fastest growing state in the nation, job growth has been running at more than a 4-1/2 perc...
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President Jordan.
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Thank you, Mr. Chairman. Let me start with a puzzle I am left with after listening to some of the comments that have just been made about inventories, oil, and the connection between oil inventories and imports. I may be missing something. If the increase in inventories is basically composed of imports, whether they ar...
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Only breakouts!
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A communications company told us that they now feel compelled to pass through steep increases in labor compensation costs to their customers because they are no longer able to meet such costs through greater productivity and efficiency. We were told that tourism is booming everywhere, but average occupancy rates in hot...
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President Boehne.
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The economy of the Philadelphia District continues to operate at high levels, but the rate of increase appears to be slowing. The labor market in the District reflects this situation with a low unemployment rate and slowing job growth, and there continues to be little upward pressure on prices. Home sales have been doi...
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President Broaddus.
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Thank you, Mr. Chairman. Our District has been expanding at a moderate pace in recent weeks, maybe a little more slowly than earlier in the year mainly because of a deceleration in manufacturing activity, notably in the chemical and paper industries, which are important in our region. Anecdotally, manufacturers current...
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It has the highest unemployment level.
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Well, my son has dropped it down a little.
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Did he get a signing bonus?
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He did not get a signing bonus. But incidentally I should tell you that the job he got was recruiting high-tech workers. [Laughter]
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Does he know anything about that subject?
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I hope he does by now; he has been working for them for a couple of days. [Laughter] With respect to the national economy, real GDP growth may indeed have slowed to a 1-1/2 percent rate, the figure you gave us earlier, Mike, with inventory accumulation slowing from the rapid pace in the first quarter and net exports co...
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President Moskow.
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Thank you, Mr. Chairman. Apart from the GM strike, conditions in the Seventh District generally are quite similar to what I reported at the last several meetings. Our region is experiencing continued moderate expansion and very tight labor markets, with occasional signs of wage increases but very few indications that p...
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President Guynn.
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Thank you, Mr. Chairman. The Sixth District economy is still operating at a high level, but recent growth appears to have been slightly slower than that I reported at the last FOMC meeting. Retail sales have posted only modest gains above those of a year ago, while the stories on manufacturing are mixed, with strong re...
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How long is the lease?
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I'm not sure. [Laughter]
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As long as they stay!
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As long as they stay. On the national front, like others, I see an economy that is divided into two very divergent sectors: the international sector, which is looking weaker and weaker, and a strong domestic economy, where growth was paced in the first quarter by robust gains in consumer spending, business investment, ...
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President Stern.
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Thank you, Mr. Chairman. The regional economy continues to do very well: consumer spending is strong, construction activity is strong, and business attitudes are generally upbeat. The only exception to those favorable patterns is in the natural resource industries--agriculture, energy, and paper--where conditions are c...
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President Hoenig.
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Thank you, Mr. Chairman. Since we had a very fine report on the Tenth District earlier, I will keep my comments relatively brief. [Laughter] I will say, though, that the District economy remains strong. Our directors and business contacts report signs of this strength everywhere. Consumer spending is brisk, manufacturi...
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Vice Chairman.
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Thank you, Mr. Chairman. The Second District economy has been quite strong in the second quarter. Our manufacturing sector, which is concentrated in the northern half of New Jersey and upstate New York, actually began to look up a bit until the General Motors strike came along. GM has laid off about 5,400 workers of th...
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As opposed to unwatchful waiting not being the right policy!
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President Poole, no double negatives, please! [Laughter]
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I will try not to double anything. Since our last meeting, there has been no significant change in Eighth District economic conditions. We continue to have exactly the same kind of stories about tight labor markets and firms with unfilled positions. We don't see any great upward pressure on product prices. We do have s...
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That is really serious! [Laughter]
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It's the only thing that is giving Mike Prell reason to pause.
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I don't drink beer! I am wondering how the record will look in five years. [Laughter]
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I am told that the management of Anheuser intends to keep the brewery operating, so I guess it will become the largest microbrewery in the United States. District housing markets remain very strong. In most markets, we have seen house price increases in the 5 to 10 percent range over the last year. Prices in the St. Lo...
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Governor Meyer.
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The most important developments since the last meeting relate to near-term growth. They include early signs of the projected slowing in inventory investment, the GM strike, and the further deterioration in foreign real economic activity centered in Asia and Japan that is threatening to spread elsewhere. The combined ef...
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Governor Rivlin.
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Like many around the table, I find the Greenbook forecast very appealing. It would be nice if it were right! I think that if the forecast turned out to be right, we would find ourselves in a situation that is extremely interesting, unusual, and uncertain but not difficult. By that I mean the soft landing would get us o...
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Governor Gramlich.
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Thank you, Mr. Chairman. At one level it might seem that this meeting is more of the same, but as our earlier discussions have brought out, there have been subtle differences on the policy question since this expansion has proceeded. Beginning with the domestic economy, the first quarter was unsustainably rapid by almo...
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Governor Kelley.
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Thank you, Mr. Chairman. A strong thread has been running through the discussion all afternoon relating to the stark difference between the domestic and the foreign outlook. It is leaving us with an unusual and bifurcated decision mix that I find rather uncomfortable. If we think about the United States economy domesti...
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Governor Ferguson.
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Thank you, Mr. Chairman. I think I'm the last to speak, so I will try to be brief. We received a number of signals during the intermeeting period. Many of these indicators point to a continued uptrend in the economy, perhaps at a slower pace but not necessarily one that is without inflation risks. As others have said, ...
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I think we have time this afternoon for one last item on the agenda. You may recall a fairly elaborate paper that was circulated entitled "Issues Arising from the Zero Constraint on Nominal Interest Rates.' I don't think we will want to get involved in a particularly long discussion of this issue, but I do think it's p...
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I will try to be brief, Mr. Chairman. My colleagues, David Reifschneider and David Small, who did much of the work on the paper are seated at the table. Hopefully, they will answer your questions! This study was prepared in response to a discussion at the February meeting of the Committee. A number of you noted that fo...
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Thank you. Questions for Don?
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I think this is a very nice piece of work, but if I were assigned a job of refereeing it for a journal, I know that it would take me two or three days, maybe a week, of hard full-time work to get through the paper and get to the bottom of it. There are a lot of very interesting but very important technical issues affec...
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I will tell you one thing that I do not want to do and that is to send this out of this room or out of this building and have it leaked to the newspapers. If that were to happen, it would give all the wrong signals. I don't know how to avoid having somebody leak it.
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I agree. Obviously, if it is going outside, it would have to be done in a way that would not cause us grief from that point of view.
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I don't know how we would do it!
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I think, Mr. Chairman, the staff does intend to try and re-dress the paper and put pieces of it out, the model simulations in particular, as a working paper in the working paper series here. There is another paper on this general topic that has been presented at college seminars by other Federal Reserve researchers. Th...
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If you feel confident, I feel confident as I shake! [Laughter]
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I feel less confident now than I did a few minutes ago! [Laughter]
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This is an issue that has been discussed in the academic literature for a long, long time.
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I know and it is a crucial issue. A couple of years ago we had an extended discussion of the Akerlof, Dickens, and Perry paper. It is a very crucial issue, and I think it is important for us over the long run to get a fix on it. I am concerned about the press looking for any indication of what we might be thinking. I w...
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In any case, though, I think we should take up what I heard as Bill Poole's offer to give it a very serious review. [Laughter]
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That would commit him to a week of hard labor!
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President Jordan.
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Thank you. I think that getting other input on the paper, if a way can be found without creating all kinds of problems for us, would be very desirable. But like the research that was done a couple of years ago on the costs and benefits of reducing inflation, I have a difficulty with the starting point. To reduce inflat...
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I think a favorable productivity shock, even in the context of this paper, would not present the Committee with a problem for the reasons that were discussed earlier in this meeting. Such a shock tends to raise the equilibrium real interest rate and it tends to boost growth. I think what becomes an issue in this paper ...
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That is why I referred to initial conditions. We do not get that liquidity trap effect where efforts to increase the monetary base only add to excess reserves unless we start with the initial condition of inadequate aggregate demand. If we start with a favorable productivity shock and we have stable purchasing power of...
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President Minehan.
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I just wanted to comment that I was struck by the juxtaposition of a highly theoretical and really interesting paper that we received at the same time we got a paper on the real world that shows that the Japanese government and the Bank of Japan are faced with the same range of choices that the staff put on the table i...
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I think the intention, President Minehan, was to concentrate on the modeling part of the paper, not on the other part.
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I see, although policy options do get included to a minor extent in some of the variations you put into play in the modeling exercise. In any event, the paper made me conscious of the fact that there are a lot of other papers on this subject that I read a long time ago, and I am going to go back and reread them. So, I ...
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Over the weekend?
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Likely more than a weekend.
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President Parry.
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I think this is a very interesting, useful, and important study. I would agree that it involves a very difficult subject to study, and all of us probably should spend a lot more time with it. I think Don Kohn hit on most of the quite interesting issues that I saw in the paper. I found the one about taking more vigorous...
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I just realized that the paper could go out without difficulty and sensitivity if it were sent out by Ted Truman. [Laughter] It is so obviously the Japanese issue and not ours.
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You would have to simulate it with a Japanese model, though. [Laughter]
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President Broaddus.
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Bob Parry already made my point and I would just underline that this is an interesting paper. It is an important subject, and I think it deserves discussion. If there's a public perception problem, then I think we could, at least as a starter, have a very robust discussion within the System. There are a lot of people o...
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Vice Chair.
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I want to support the point that has just been made. I think we have enough intellectual resources within the System that have not been brought to bear on this paper because of the shortage of time. It was very difficult for any of us to spend enough time on it, let alone to have an in-depth discussion with our staffs ...
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President Hoenig.
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Much has already been said, but I want very briefly to reiterate some of President Jordan's comments. If I understood correctly, this model's parameters were developed in a period when we had declining inflation. I believe it is very important, though, that we look at it in the context of zero inflation and a stable ec...
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Are you suggesting what the topic at Jackson Hole will be next year?
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I am open to suggestions.
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Governor Meyer.
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I thought this was a very interesting and very useful study and entirely relevant, not only to what is going on in Japan but to the low inflation environment that is now in place throughout the developed economies of the world. I would feel more confident about the results if they were replicated in a variety of other ...
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President Stem.
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I, too, thought this was a useful study, especially in terms of getting us to think more concretely about our objectives. We do have a lot of talent available within the System. We could spend time profitably with some further analysis and discussion of all of this. I did have a couple of reservations about the study a...
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Governor Ferguson.
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President Stern has picked up my point. I thought the paper was very interesting, but in some sense quite inwardly focused because it is all about what we should do. It missed what for me is an important point, the one in the Akerlof paper to which the Chairman alluded. I guess I would like to see added to this study s...
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Unfortunately, we did turn the best minds in the System loose on that three or four years ago, and they could not reach a conclusion. [Laughter] They could not show that there were benefits from reducing the rate of inflation below 2 or 3 percent.
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Given the turnover of the Committee, it probably would be sensible for us to recirculate that material, at least to all those who have not received it.
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We also have to put it in a broader context. Those of us who have recently been confirmed as Board members had to go through a bit of grilling by a few senators on why we did not think an inflation target might be a good idea. It is easy to dance around that issue, but it would be nice to attack it directly.
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We have to be a little careful. I think we have demonstrated in this country in the last four or five years that the notion that was held rather tentatively, namely that low inflation has a very significant and favorable effect on long-term economic growth, is now being held very firmly. In other words, the experience ...
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That's not where we are now!
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It's not where we are now, but I just want to stipulate that these types of discussions can take on a bias that we never intended them to take. We have to make sure we are wary of that.
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I agree. That is the magic of the verbal rather than the numerical definition of price stability.
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I have the unenvied position of being chair of the Board's Committee on Economic Affairs, and I have been wondering about not having a whole lot on our plate. [Laughter] One thing this Committee might do, as some already have suggested, is to organize a conference. If we were to do that, I think we definitely should op...
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There is this nice lake in Wyoming where one might do this.
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We can talk about that, too.
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