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fomc | 1,998 | That is Larry Meyer's committee, I presume. | 10 |
fomc | 1,998 | Well, if we could do that, it would give us some sense of how we as a group view the tradeoff. So I think that would be helpful. | 33 |
fomc | 1,998 | In one respect the Fed is a bank supervisor; in another the Fed as the central bank has some degree of responsibility for financial stability. I think that implies a broader discussion. | 35 |
fomc | 1,998 | It is the latter context that I had in mind. | 11 |
fomc | 1,998 | Our committee will certainly be engaging in a broader dialogue with all of you as we think about this. | 20 |
fomc | 1,998 | It sounds as if we have exhausted this interesting subject for now or at least it has exhausted me. | 20 |
fomc | 1,998 | Unless you get up and run, you will find that you are mistaken. [Laughter] In all seriousness, does anybody have any quick additional issues to raise? | 33 |
fomc | 1,998 | Let's run quickly! | 4 |
fomc | 1,998 | The meeting is adjourned. Thank you all very much. | 13 |
fomc | 1,998 | Before we get started I would just like to reflect on the fact that it is Bill Dewald's last meeting. He is sitting over there seeing that we do the right thing, a struggle requiring infinite patience among other things. He has been the Director of Research at the St. Louis Bank for six years. We will miss you, Bill, a... | 84 |
fomc | 1,998 | Is applause appropriate? | 4 |
fomc | 1,998 | Yes. [Applause] Who would like to move to approve the minutes of the September 29 meeting? | 23 |
fomc | 1,998 | So move. | 3 |
fomc | 1,998 | Without objection. As you know, in two or three of our recent meetings, we have been contemplating ways to improve a number of the procedures that we use to communicate to the public. We seem to have reached a consensus around this table that the wording in the operational paragraph of the directive requires some revis... | 94 |
fomc | 1,998 | Mr. Chairman, beginning on page 15 in the Bluebook for today's meeting, we list three options for Committee consideration. Option 1 is the traditional language. Option 2, which was included in a memorandum that I wrote to the Committee in early November, reflects the revisions that President Hoenig suggested at the Sep... | 196 |
fomc | 1,998 | I would like to apologize to everyone because I really didn't mean to complicate needlessly or in any event to extend the discussion to yet another alternative. What I thought I was doing in responding to the request for possible rewording was to include a reference to the balance of risks in the paragraph. On the basi... | 306 |
fomc | 1,998 | I never heard anybody talk about risks as "warm and fuzzy." [Laughter] President Jordan. | 20 |
fomc | 1,998 | Cathy, your alternative wording for a tilt in the directive refers to economic, financial, and monetary developments; that is fine. Option 2 talks about prospective developments, tilt or no tilt; that is fine as well. I am agreeable to talking about risks, but your "no tilt" sentence refers to "risks to the economic ou... | 129 |
fomc | 1,998 | My intention was that the reference to the economic outlook would be modified by the subsequent phrase about changes in "economic, financial, and monetary conditions" so that the two expressions would be considered to be equivalent in the context of that sentence. But I see the problem that you're talking about. | 57 |
fomc | 1,998 | Vice Chairman. | 3 |
fomc | 1,998 | Mr. Chairman, I understand the logic of Option 3, but when we talk about risks to the forecast, we are engaging in internal Fedspeak. Jerry Jordan has picked up on the concern I would have about mentioning risks in this context, namely that the average American would conclude that we thought economic growth was a risky... | 289 |
fomc | 1,998 | President Broaddus. | 5 |
fomc | 1,998 | Mr. Chairman, I think that either Option 2 or Option 3 would be a significant improvement over what we have now. For the reasons that Jerry Jordan mentioned, I would have a preference for Option 2. In my view, it is a little more compact and a little clearer. I would agree with those who feel that we should remove the ... | 194 |
fomc | 1,998 | President Boehne. | 5 |
fomc | 1,998 | I prefer Option 2. In my view, it captures what we have been talking about around the table. I would drop the sentence beginning with "Any potential changes." My only reason for suggesting its deletion is that I think it is basically redundant, though it is substantively harmless. We need to have a Chairman who is full... | 111 |
fomc | 1,998 | President Parry. | 4 |
fomc | 1,998 | Mr. Chairman, I prefer Option 2, and I would like to remove that third sentence because I, too, believe it is redundant. It seems to me, though, that both Options 2 and 3 are a tremendous improvement over the wording we have been using in recent years. | 59 |
fomc | 1,998 | President Stem. | 3 |
fomc | 1,998 | I think Option 2 would be a distinct improvement and I favor that. I think dropping that sentence about "any potential changes" is probably a good idea because it seems redundant to me, but I don't feel very strongly about it. | 47 |
fomc | 1,998 | Governor Meyer. | 3 |
fomc | 1,998 | I want to join what seems to be the emerging consensus. I, too, prefer Option 2, and I would eliminate the sentence in question. I don't think it adds anything, and whatever is briefer and more to the point is better. I also would echo the view that it would be desirable for us to move at some point to the immediate re... | 82 |
fomc | 1,998 | Governor Rivlin. | 4 |
fomc | 1,998 | I, too, after thinking Cathy Minehan was on the right track, am back to Option 2 because it is simpler. The subtleties of the sentence that is under consideration for removal had escaped me, so I was in favor of taking it out. I still favor dropping it unless there is some subtlety that can and should be conveyed. But ... | 97 |
fomc | 1,998 | Governor Ferguson. | 3 |
fomc | 1,998 | Mr. Chairman, I think either option would be an improvement over what we currently have, but I, too, have a slight preference for Option 2 mainly because I think our discussion about risks is very internally focused. On the other hand, I hope we will decide to release the directive and, therefore, I would like somethin... | 116 |
fomc | 1,998 | President Poole. | 4 |
fomc | 1,998 | I favor Option 2, and I agree that the sentence about "any potential changes" does not add to the clarity of the directive. A new issue that I would like to raise relates to the last sentence of the directive concerning M2 and M3. I would hope that we would not have a ritual expectation of slowing monetary growth if we... | 132 |
fomc | 1,998 | Do you mean that you would refer to it as a staff forecast as distinct from a Committee statement? | 20 |
fomc | 1,998 | Perhaps, yes. | 4 |
fomc | 1,998 | We actually were using monetary growth numbers in that sentence earlier. When the Committee downgraded the monetary aggregates further in 1993, we changed the wording of that sentence to eliminate the numbers and include a qualitative description. Our intent always has been to provide a qualitative description that exa... | 129 |
fomc | 1,998 | There is a potential problem here. I agree with Al Broaddus that the federal funds language should refer to the intermeeting period, but I think it's clear that the reference to growth in the monetary aggregates covers more than the intermeeting period. So, we should put in some language that has a longer horizon for t... | 66 |
fomc | 1,998 | Mr. Chairman, could I explain why, unlike some others, I feel as I do on the Option 2 sentence in question? | 27 |
fomc | 1,998 | Let's first finish our discussion of the money supply issue. Does anybody else have any views about how to handle that question? | 24 |
fomc | 1,998 | I think that President Poole is bringing up an extraordinarily good point. It is almost an embarrassment to use over and over a standard sentence that incorporates an expectation that can only sometimes be right. If we want to include this reference in the directive, we should adjust it to reflect changes in the money ... | 62 |
fomc | 1,998 | Does anyone have any further insights? I think that raises a quite unanswerable question, but we do have to resolve it one way or another. It is a problem in the sense that if the contemplated reserve conditions are constantly changing but are always consistent with some moderation in the growth of M2, it strikes me th... | 89 |
fomc | 1,998 | In recent memory, which includes the last couple of years, we have altered the wording in that sentence to say "consistent with moderate growth of M2 and M3 in coming months" when we thought such growth would continue to be moderate. While actual monetary growth has been strong this year, we have had a persistent staff... | 91 |
fomc | 1,998 | It turned out that the sentence was wrong, but that wording was not locked in. | 17 |
fomc | 1,998 | Exactly. It is not locked in. It just happens to describe the staff forecast over coming months. | 20 |
fomc | 1,998 | The choice should be "moderate" or "some moderation." | 13 |
fomc | 1,998 | When it has been appropriate in terms of our forecast, we have said "moderate." | 18 |
fomc | 1,998 | I think President Minehan has the right answer. | 10 |
fomc | 1,998 | That's a good point. At meetings in the future, the Committee could choose what the exact wording will be. The Committee may want to do that henceforth. | 32 |
fomc | 1,998 | Is everyone in agreement that that is advisable? SEVERAL. Yes. | 15 |
fomc | 1,998 | Vice Chair, you have the floor on the other sentence. | 12 |
fomc | 1,998 | I just wanted to clarify my view on the "any potential changes" sentence and why it should be included in the directive. Those who say that it should not be there are saying that it is redundant, and for us around this table it is redundant. But we are not the only audience. There is a whole world out there filled with... | 220 |
fomc | 1,998 | President Moskow. | 4 |
fomc | 1,998 | I agree with the consensus to go with Option 2. I think the sentence that President McDonough is referring to is redundant and unnecessary. I just wonder if there is some other way to deal with the problem that you raise, Bill, which is a real problem. We might put out a statement when we notify the public about our fu... | 118 |
fomc | 1,998 | I think such clarifications tend to get lost, and this problem would be perpetuated meeting after meeting. In the effort to eliminate redundancy, we really would be inviting a problem that we don't need to have. | 42 |
fomc | 1,998 | Would President Broaddus's recommendation resolve this? One possibility is to combine the sentences to read in part "more likely to warrant [a further] increase/decrease than [a further] decrease/increase in the federal funds rate in the intermeeting period" instead of "in coming months." It might be an interesting way... | 70 |
fomc | 1,998 | May I speak to that point, Mr. Chairman? I may be a minority of one in thinking that your suggested revision doesn't do what we need to do. Okay, I may be speaking for others! As I read our use of the tilt, it covers a longer period than the specific intermeeting period. If we collapse the two, we will leave a false im... | 106 |
fomc | 1,998 | Why don't we say "in the intermeeting period and in coming months?" Would that do it? | 20 |
fomc | 1,998 | That answers my particular problem. | 6 |
fomc | 1,998 | The problem that I have with a longer time frame is that we review the tilt sentence routinely at every meeting. We may not come to the same conclusion from meeting to meeting, though we tend to do so more often than not. In any event, the tilt adopted at a given meeting is operative only in the intermeeting period bec... | 75 |
fomc | 1,998 | That, I think, is the magic of the original drafting. It picked up the "in coming months," which is longer than the intermeeting period, but it gave the Chairman the power to adjust policy in the intermeeting period. It explained with the greatest clarity how we, in fact, behave. | 61 |
fomc | 1,998 | It is not power; it is authority. Power is irrelevant. | 13 |
fomc | 1,998 | Agreed. Correctly stated. | 7 |
fomc | 1,998 | President Guynn. | 4 |
fomc | 1,998 | Mr. Chairman, I found working through this issue much like eating the first raw oyster I ever ate. The more I chewed on it, the bigger it got and the harder it got to swallow. [Laughter] Our discussion this morning has not made this issue any easier to swallow. I certainly agree with others who say that Option 2 is an ... | 197 |
fomc | 1,998 | Governor Kelley. | 3 |
fomc | 1,998 | Mr. Chairman, I am on record as in favor of taking out the sentence that has been under discussion, and that is still my preference. I do agree that the sentence is redundant, but I also think that it would be confusing to the public. Its subtleties are rather deep. I have no problem with the sense that the sentence is... | 161 |
fomc | 1,998 | President Hoenig. | 4 |
fomc | 1,998 | Mr. Chairman, after listening to this discussion, I would mention first that I think the solution that you and Al Broaddus proposed of placing "intermeeting period" at the end of that sentence strikes me as a good suggestion. I would then take out the sentence we have been talking about. I agree with Governor Kelley th... | 107 |
fomc | 1,998 | It becomes clear only if you put in "intermeeting period." | 13 |
fomc | 1,998 | I agree with that. | 5 |
fomc | 1,998 | This becomes a language question. I do concur, however, with the point that Governor Kelley made that the previous positions taken by this Committee are void as of the next meeting. In that sense, we may continue with a given tilt indefinitely, but it does require renewal every time we meet. We give the Desk authority ... | 110 |
fomc | 1,998 | That is just what I was going to do! [Laughter] First, I am for Option 2. I was all set to support Bill McDonough on keeping the sentence in question just to point out to the world that there could be changes in the funds rate in the intermeeting period. But I think your proposed insertion of "in the intermeeting perio... | 216 |
fomc | 1,998 | President Minehan. | 4 |
fomc | 1,998 | Mr. Chairman, I just wanted to weigh in on the time period question. I am fully in agreement with you and Governor Kelley that we should confine the tilt sentence to the intermeeting period. I changed the language in my alternative to be very explicit about that. So, I think the change that you and President Broaddus h... | 160 |
fomc | 1,998 | President Jordan. | 3 |
fomc | 1,998 | On the sentence relating to the tilt, I would like to substitute "the intermeeting period" for "in coming months" and to delete "in coming months." I do, though, want to ask that the staff think about that last sentence on money and the aggregates. The only thing I like about this sentence is that the constant repetiti... | 174 |
fomc | 1,998 | That is a problem. I feel very uncomfortable about our inability to understand fully what the monetary aggregates are telling us. I fear that we are missing something subtle, something we have not yet grasped. President Parry. | 44 |
fomc | 1,998 | Mr. Chairman, I forgot to note that if we do eliminate that sentence, there is in my view an advantage to referring to "the federal funds rate operating objective" instead of just to the "federal funds rate." The former is really what we deal with. | 54 |
fomc | 1,998 | Mike Kelley has given me a note that I think is to the point, namely that we have made considerable progress today. We are not quite there, but I think we are now down to Option 2. We are down to a couple of variations of the tilt sentence. We are down to options on how we should handle the M2-M3 sentence. Since we are... | 182 |
fomc | 1,998 | I am happy to wait another month, but when we reconsider the language can we also have on the agenda the issue of the immediate release of the operational paragraph? | 32 |
fomc | 1,998 | I see that as a separate issue. I do think that we can and should put it on the agenda, but we don't have to decide both questions the same way. | 34 |
fomc | 1,998 | We cannot immediately release something we have not agreed on. [Laughter] | 15 |
fomc | 1,998 | I acknowledge that! Let us put that issue on the table again. Hopefully, we will get this wording issue resolved at the next meeting and perhaps make considerable progress, even come to a conclusion, on the release issue. President Poole. | 48 |
fomc | 1,998 | I just wanted to emphasize the release issue, too. I do not want to miss the discussion of immediate release. | 23 |
fomc | 1,998 | We finally got through! Peter Fisher. | 8 |
fomc | 1,998 | Thank you, Mr. Chairman. I am going to be referring to a package of colored charts that you should find in front of you.1/ My report today will be in two parts. First, I will discuss market conditions and review domestic open market operations, answer your questions, and seek your ratification of our open market operat... | 3,573 |
fomc | 1,998 | I have observed that we are continuously getting a glut of yen and a disinclination to hold them, but the oversupply does not seem to be spilling over into the foreign exchange markets in any significant way. It is a fact that the total size of the Bank of Japan's balance sheet is greatly expanded, and there are very l... | 89 |
fomc | 1,998 | That is a very good question, and I wish I had a precise answer to it. I think that it is important to look at the last two months. I didn't talk a lot about the big move in the dollar/yen that we had. That was an extraordinary event, obviously, in terms of the standard deviation of the move. It was also an extraordina... | 113 |
fomc | 1,998 | This was a yen-carry reversal? | 8 |
fomc | 1,998 | This was the unwinding of the yen-carry reversal and a move down in the dollar/yen. | 21 |
fomc | 1,998 | You just expressed that in terms of a double negative! | 11 |
fomc | 1,998 | Right! I see the big move down in the dollar/yen as just a reflection of the delevering. That delevering was going on in many places, and one place where it showed up was in the dollar/yen exchange rate. The latter then triggered a series of extraordinary movements that developed into a big technical move down, forgive... | 195 |
fomc | 1,998 | Any other questions for Peter? If not, President Jordan. | 12 |
fomc | 1,998 | Are we discussing the whole range of topics, including the purchase of indexed securities? | 16 |
fomc | 1,998 | Yes. | 2 |
fomc | 1,998 | In a very important sense, when we buy Treasury securities we effectively cancel that part of the government's debt. The word "monetize" is used to describe that result. Wright Patman used to say that the bonds owned by the Federal Reserve might as well be burned because the Treasury gives the Fed interest on those bon... | 93 |
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