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fomc | 1,998 | Thank you, Mr. Chairman. Your comments and those of others this morning and in yesterday's discussion certainly have reinforced my sense that we are seeing some signs of a slowing expansion and can identify some new, larger downside risks than we could at the time of the last meeting. At the same time the slowing in co... | 220 |
fomc | 1,998 | President Stern. | 3 |
fomc | 1,998 | Thank you, Mr. Chairman. I certainly share most of the concerns you expressed and it seems to me, given the trends that I believe are in place and at the risk of some oversimplification, that how things play out domestically largely depends on what productivity does. Some outcomes are going to be much more favorable th... | 133 |
fomc | 1,998 | Governor Kelley. | 3 |
fomc | 1,998 | Mr. Chairman, I am in sympathy with virtually everything every speaker has said, and I support your recommendation. | 22 |
fomc | 1,998 | President Hoenig. | 4 |
fomc | 1,998 | Thank you, Mr. Chairman. I agree with your proposal. I am willing to wait and see if the growth in domestic demand slows and I am mindful of the international situation, but I have a couple of comments. I believe domestic demand is stronger than is consistent with long-term price stability. We have to be very much awar... | 126 |
fomc | 1,998 | Governor Rivlin. | 4 |
fomc | 1,998 | Certainly nothing is ever going to be perfectly clear! I support your recommendation, Mr. Chairman. As I said yesterday, I think the staff may be overestimating the potential for a slowdown in the near term, but I also am very worried about Asia and the possibility of a general collapse in several foreign countries. I ... | 93 |
fomc | 1,998 | Governor Meyer. | 3 |
fomc | 1,998 | Thank you, Mr. Chairman. In light of the sharp slowdown in U.S. economic growth that appears to have taken place in the second quarter, the increased potential for a more persistent slowdown due to the further deterioration in foreign economic activity and perhaps especially due to the substantial increase in global ri... | 128 |
fomc | 1,998 | President McTeer. | 5 |
fomc | 1,998 | The upside risk appears to have risen further, as it probably did at each of our last several meetings, but the downside risk seems to have gone up quite sharply since the last meeting to the point that I think the risks, even though they are both greater than they were, are now relatively balanced. I guess I am willin... | 253 |
fomc | 1,998 | President Poole. | 4 |
fomc | 1,998 | My concern is that meeting after meeting we are drifting into a situation that will accommodate higher inflation next year and the year after. Let me start with an assumption about the policy environment that we are going to be facing over the next few meetings through the rest of this year. The inflation rate over the... | 521 |
fomc | 1,998 | Governor Gramlich. | 4 |
fomc | 1,998 | Mr. Chairman, I support your recommendation and as always I think you have made some interesting points in your analysis. I would like to comment on a few things that I heard around the table. The first is on Asia. To put in a word for something that Jerry Jordan implied yesterday and Bill Poole implied just now, some ... | 506 |
fomc | 1,998 | I think we have a large block of potential votes going for "B" asymmetric. Would you read the appropriate language for the directive to embody that. | 30 |
fomc | 1,998 | The wording is from page 23 in the Bluebook.: "In the implementation of policy for the immediate future, the Committee seeks conditions in reserve markets consistent with maintaining the federal funds rate at an average of around 5-1/2 percent. In the context of the Committee's long-run objectives for price stability a... | 126 |
fomc | 1,998 | Call the roll. | 4 |
fomc | 1,998 | Chairman Greenspan Yes Vice Chairman McDonough Yes Governor Ferguson Yes Governor Gramlich Yes President Hoenig Yes President Jordan No Governor Kelley Yes Governor Meyer Yes President Minehan Yes President Poole Yes Governor Rivlin Yes | 43 |
fomc | 1,998 | Let's break for coffee and then when we come back, we will discuss the subject that we postponed from the last meeting, alternatives for disclosure policy. | 29 |
fomc | 1,998 | Mr. Kohn, would you lead us off? | 11 |
fomc | 1,998 | Thank you, Mr. Chairman. At the meeting in March, several members suggested that the Committee consider whether some explanation should be given to the public after each meeting when no change is made in monetary policy. Two proposals were put on the table at the March meeting. One was to release the directive when the... | 1,739 |
fomc | 1,998 | President Boehne. | 5 |
fomc | 1,998 | This is a topic that has been the basis for a lot of discussion from time to time, and I think it is worthwhile to bring it back and discuss it again because circumstances change, people's views change, and the Committee's membership changes. I would like to provide a few observations because this is not the first time... | 1,254 |
fomc | 1,998 | That was a very thoughtful evaluation and historical review. On the basis of my own experience, I come out at the same place. I have gone around and around on this issue and I keep ending up in the same spot for exactly the reasons Ed Boehne mentioned. Governor Kelley. | 57 |
fomc | 1,998 | Mr. Chairman, I strongly agree with President Boehne, and between what you and he just said, you have preempted the substance of the statement that I wanted to make. But if you will indulge me, I would like to go ahead and try to expand on what Ed Boehne said. I did sit on that earlier subcommittee, as Don mentioned, a... | 1,650 |
fomc | 1,998 | President Broaddus. | 5 |
fomc | 1,998 | Mr. Chairman, I am going respectfully to take the opposite view from that supported by Ed Boehne and Mike Kelley. Incidentally, I would like to thank Dave Lindsey for his memorandum that I think laid out the choices well, especially the roadmap. That was a huge help, for me anyway. I believe any consideration of this q... | 789 |
fomc | 1,998 | President Parry. | 4 |
fomc | 1,998 | I had a question for Don Kohn before making a comment. Don, you referred to occasions when we did not change policy but saw a possibility that we would do so in the next week or so after the meeting depending on the incoming data. How did that affect our wording of the directive? Do you recall? | 63 |
fomc | 1,998 | No, I don't recall exactly. I believe the Committee adopted a very strong asymmetrical tilt. I am thinking of December 1991 when the discount rate was cut by a full percentage point and the federal funds rate was cut by 1/2 percentage point less than a week after that December meeting. The members left the meeting with... | 116 |
fomc | 1,998 | I cannot remember either. Let me make a few comments. There have been some interesting points made with regard to reasons why we might not want to announce changes in the tilt. But I believe there are some advantages to making an announcement when we change the tilt as well as when we change the funds rate itself. Anno... | 396 |
fomc | 1,998 | Governor Rivlin. | 4 |
fomc | 1,998 | I come out where Mike Kelley, Ed Boehne, and the Chairman do. I did not get there very easily. It does seem to me that we have an obligation to be as clear as possible and to get across to the press and the public that follows monetary policy developments that we are dealing with hard issues, that we are balancing risk... | 460 |
fomc | 1,998 | Mr. Chairman, could I remind us all why we decided to do it that way? If we change the tilt but not the federal funds rate and we say there is "no change" in policy, we are in some sense lying because there has been a change in policy. There has been a change in the tilt. | 65 |
fomc | 1,998 | I agree with that. | 5 |
fomc | 1,998 | That is why we invented the notion of saying "the meeting has ended, there is no further announcement." | 21 |
fomc | 1,998 | Can't we say we decided not to move the federal funds rate? | 13 |
fomc | 1,998 | Had we said that the first time, I suppose we could continue to say that. | 17 |
fomc | 1,998 | Can't we now? | 4 |
fomc | 1,998 | The reason that we want to be very clear is precisely not to deceive the public. | 17 |
fomc | 1,998 | I don't think what I am proposing would deceive the public. | 12 |
fomc | 1,998 | I think our current practice has the benefit that people are used to the way we do it now. | 20 |
fomc | 1,998 | I agree that it may be arcane, but I think it is unambiguous. | 18 |
fomc | 1,998 | I think it just adds to the perception of a mysterious Federal Reserve. | 14 |
fomc | 1,998 | If you can figure out a way to get the directive rewritten, everyone around this table, or a majority at least, would agree that that would be a great accomplishment. We tried several times to improve the paragraph, but without success. The current wording is awful. We all agree it is awful, but the trouble is we all a... | 78 |
fomc | 1,998 | Let us try again! | 5 |
fomc | 1,998 | If you succeed, you could be a candidate for one of three Nobel prizes: literature, economics, or peace. [Laughter] | 27 |
fomc | 1,998 | President Stem. | 3 |
fomc | 1,998 | Thank you, Mr. Chairman. Let me start by saying what I am not in favor of. I am not in favor of releasing the tilt, the full directive, or the operating paragraph of the directive. I believe there probably is more noise than value in doing any of the above. Having said that, I do think that increased disclosure and inc... | 351 |
fomc | 1,998 | I want to comment on that briefly. I think it is far easier to write a statement when we are taking action because we have a majority of the members who favor the policy move, presumably largely for the same reasons. It is very difficult to agree on a statement when we are not taking action. In other words, to try to c... | 141 |
fomc | 1,998 | You could well be right. I suppose we could, if we wanted to, try it out internally before deciding to go public with it to see after a meeting or two whether we could craft a statement that people agreed with. Presumably, you would want to have something in the back of your mind before the meeting began, so you could ... | 87 |
fomc | 1,998 | President Poole. | 4 |
fomc | 1,998 | When I try to think through this issue, I start with three elements. We have policy decisions; we have a policy rationale that we try to convey to the markets; and we have the internal policy debate. I think it is very important that the internal policy debate be kept confidential so that we can have a complete and fre... | 491 |
fomc | 1,998 | Governor Gramlich. | 4 |
fomc | 1,998 | I have not been struggling with this issue very long as everybody knows, but I am tentatively in favor of releasing the operational paragraph, or something like it, after every meeting essentially for the reason that Bill Poole just gave. At the same time, I understand the arguments that Ed Boehne, Mike Kelley, and the... | 456 |
fomc | 1,998 | Governor Meyer. | 3 |
fomc | 1,998 | Thank you, Mr. Chairman. I think we already have had some very thoughtful discussion of this topic. I will try to add incrementally to that if I can. I believe we have an opportunity to take another small step toward greater transparency. I believe such a move would be constructive because the additional information wo... | 535 |
fomc | 1,998 | Governor Ferguson. | 3 |
fomc | 1,998 | Thank you, Mr. Chairman. After listening to a number of very good arguments from people who have much longer tenures than I do in this area, I will weigh in just a little. I believe that we have two decisions to make. The first is whether we should make any announcements after meetings when there is no change in policy... | 624 |
fomc | 1,998 | President Guynn. | 4 |
fomc | 1,998 | Thank you, Mr. Chairman. I have been the beneficiary for many years of the wisdom and experience of Ed Boehne and Mike Kelley, and it is with some uneasiness that I come out on the other side on this issue. I am most comfortable with the kinds of comments that Al Broaddus and Bob Parry made for the following reasons. F... | 592 |
fomc | 1,998 | President Jordan. | 3 |
fomc | 1,998 | Thank you. I think that if someone did an empirical study of central bank behavior, at least for the last couple of decades of fiat monies unanchored by a gold standard or something else, they would conclude that there is an asymmetric bias toward easier money. The reason, of course, relates to the existence of an asym... | 602 |
fomc | 1,998 | Vice Chairman. | 3 |
fomc | 1,998 | Mr. Chairman, I wind up agreeing with the very fine explanations by President Boehne and Governor Kelley that have been supported by a number of people, but let me say why. First of all, a bit of history: The reason that we decided in February 1994 to announce changes in the funds rate was partly transparency and partl... | 767 |
fomc | 1,998 | President McTeer. | 5 |
fomc | 1,998 | Coming into the meeting today, my second choice was to announce the bias. I thought that would be my ultimate choice because I didn't think my first choice would get anywhere. My first choice would be to stop voting formally on the bias. We do talk about it; we have a rough idea of where each of us stands; and we know ... | 209 |
fomc | 1,998 | President Minehan. | 4 |
fomc | 1,998 | We started this discussion at the March meeting after changing the tilt in the directive and arriving at a consensus around the table that the Chairman should somehow convey that decision to the public. Subsequently, there was a "slip" or a "leak" of information concerning the Committee's new policy direction that came... | 647 |
fomc | 1,998 | President Hoenig. | 4 |
fomc | 1,998 | Mr. Chairman, as I looked at this issue and went back and read some of its history, it seemed clear to me that the whole idea of the tilt as it was designed in an earlier period was to allow compromise and build consensus. It is an internal mechanism for decisionmaking. I think the way we announce actions now is the co... | 264 |
fomc | 1,998 | President Moskow. | 4 |
fomc | 1,998 | Mr. Chairman, I actually come out very close to where Tom Hoenig did but reach that position in a slightly different way. This has been a very helpful discussion for me, including the opportunity to learn the history. I have been on the Committee slightly less than four years, and I now have a much better understanding... | 256 |
fomc | 1,998 | It is a business cycle problem. I think it becomes quite usable when events are moving very fast and in an unanticipated way. For example, there were a number of occasions during the recession when policy had to move fast and very rarely at the time of Committee meetings. So, the Chairman's role in this regard is reall... | 185 |
fomc | 1,998 | That is, of course, my point. To try to explain this to the public and to use the tilt as a method of educating the public seems fruitless to me. | 35 |
fomc | 1,998 | I agree. | 3 |
fomc | 1,998 | It will confuse the public more if we try to use this tool to educate them about monetary policy. It is the wrong tool to use. I certainly favor educating the public about monetary policy, but let's not try to do it with the tilt. I would like to find other ways to do this. I don't have any easy suggestions, given the ... | 135 |
fomc | 1,998 | We actually did improve the directive once before. | 9 |
fomc | 1,998 | This directive is clear by comparison! [Laughter] | 11 |
fomc | 1,998 | But I think we can do better. | 8 |
fomc | 1,998 | Let me suggest the following. Proposition one is that if we make a change it is irreversible. Let's be certain that to the extent we make a change, we are all comfortable that we are not going to say three meetings later that it was a mistake and we should go back. We will not be able to go back. I think this has been ... | 100 |
fomc | 1,998 | If I have the consensus! | 6 |
fomc | 1,998 | There is a lot of sentiment for releasing the directive. It is not a majority. Incidentally, in a decision like this, it is not the Committee per se but the 19, or now 18, who should make the decision because we are all involved. I think it would be a mistake to base a decision strictly on the views of those who happen... | 125 |
fomc | 1,998 | There might be less! | 5 |
fomc | 1,998 | There is the crucial question about the value in the deliberative process of various gradations of agreement, which is what the tilt has enabled us to do. I think we should come back to this issue after (1) seeing whether we can find a way to clarify the wording of the directive and (2) examining the interesting questi... | 492 |
fomc | 1,998 | Ijust read on the Dow Jones tape that this meeting was going to begin at 9:00 a.m. as scheduled. It is now 8:58:25 a.m. Does anybody object to moving up this schedule? | 47 |
fomc | 1,998 | I move that we start the meeting. | 8 |
fomc | 1,998 | Without objection. | 3 |
fomc | 1,998 | Don't tell Dow Jones! | 5 |
fomc | 1,998 | Who would like to move the minutes of our previous meeting? | 12 |
fomc | 1,998 | Move approval. | 3 |
fomc | 1,998 | Second. | 2 |
fomc | 1,998 | Without objection. Peter Fisher, would you start us off? | 12 |
fomc | 1,998 | Thank you, Mr. Chairman. I will be referring to the package of color charts, which should be on the table in front of you. 1/ The first page as usual shows the 3-month deposit rates: current, 3-month forward, and 9-month forward. Since your last meeting, there have been small but noteworthy changes in interest rate exp... | 525 |
fomc | 1,998 | He is always nice. [Laughter] | 9 |
fomc | 1,998 | Today, at least as the market sees it, the nation with the second largest economy in the world, Japan, and the nation with the largest share of the world's potential labor supply, China, are both experiencing distinctly falling prices. Moreover, the premier of China is no longer worrying about maintaining the pace of i... | 2,372 |
fomc | 1,998 | The black market ruble is selling at 9 and the fix was around 7. What are the mechanics that allow that to happen, and secondly, which of the two rates filters into the price inflation structure? In other words, which rate affects import pricing? | 53 |
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