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fomc | 1,999 | Do we deserve it? | 5 |
fomc | 1,999 | Let's keep it to 15 minutes. | 8 |
fomc | 1,999 | President Minehan. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. The situation remains about the same in New England. Labor markets are tight, with the regional unemployment rate at 3.2 percent in December. Connecticut and Rhode Island reported the two largest declines in unemployment among the nation's states in the month, and both states achieved new lows ... | 1,224 |
fomc | 1,999 | President Jordan. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. The regional economy was very strong in the fourth quarter of last year, but that no doubt reflected the weakness at midyear associated with the auto strike. But it is creating what I think of as a ski jump effect. Inevitably we are going to reach a point where people's expectations are going t... | 1,117 |
fomc | 1,999 | President Broaddus. | 5 |
fomc | 1,999 | For the sake of variety let me start off by saying that not everything is great in our District. Agriculture is hurting in our region as elsewhere. The dairy farmers, as in Cathy Minehan's District, are doing better than the others, but overall the agricultural sector is very weak. Currency depreciations in a number of... | 1,174 |
fomc | 1,999 | President Boehne. | 5 |
fomc | 1,999 | I could just say that the District economy is doing well and that the risks to the national economy are balanced, but I will bow to Committee tradition and elaborate some. The regional economy in the Philadelphia District remains strong and, if anything, has picked up a little strength recently. Manufacturing has accel... | 268 |
fomc | 1,999 | President Guynn. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. The Sixth District has begun 1999 on a moderate growth path, consistent with a healthy and balanced expansion. Residential building has moderated, at least for the moment, but that should be offset by a healthy commercial real estate sector. Factory activity was sluggish again in December, and ... | 1,419 |
fomc | 1,999 | President Hoenig. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. The Kansas City District continues to do well and its economy is basically sound. Our weak areas continue to be agriculture and energy, and there has been some slowdown in certain areas of our manufacturing sector. Of course, there is some concern on the manufacturing side about the Brazilian s... | 309 |
fomc | 1,999 | President Stern. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. The economy of the Ninth District remains strong outside of some parts of agriculture and mining. But aside from that, consumer spending is continuing to expand, construction is very strong, and labor markets remain very tight. The Twin Cities economy without question is booming, and that is a ... | 516 |
fomc | 1,999 | Governor Rivlin. | 4 |
fomc | 1,999 | I am glad I stimulated research in Atlanta. I am interested in seeing it. A couple of meetings ago I referred to the cheerful little elves who run the U.S. economy and get their kicks out of proving the cautious forecasters wrong. The only thing that can be said about the economic news since our last meeting is that th... | 805 |
fomc | 1,999 | I kept hearing green eye shade when I know that is not what you said! President McTeer. | 21 |
fomc | 1,999 | Do I have to? [Laughter] | 9 |
fomc | 1,999 | No! | 2 |
fomc | 1,999 | I will be very brief. I think Alice ought to write a poem entitled "The Elves versus the Greenbookers." | 25 |
fomc | 1,999 | It doesn't rhyme. | 4 |
fomc | 1,999 | Little has changed in the Eleventh District since our last meeting, so I will be very brief. As I said then, the growth rate in the Eleventh District economy slowed throughout 1998, and that has continued in recent weeks. With oil prices hovering in the $12 range and not expected to pick up appreciably in the near futu... | 393 |
fomc | 1,999 | President Poole. | 4 |
fomc | 1,999 | Mr. Chairman, in the Eighth District the story is primarily an echo of recent months. The Eighth District was not much affected by the credit market disturbances last fall and, therefore, we have not been much affected by the weakening of those disturbances. Rather than repeat the echo of what we have seen, I would jus... | 357 |
fomc | 1,999 | Governor Meyer. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. The forecast revisions in the Greenbook are very similar to my own and in my view constitute somewhat of a sea change in the economic outlook. It doesn't seem to me that most of you share that view, so let me explain why I think that is so. Previously the Greenbook, the consensus forecast, and ... | 1,087 |
fomc | 1,999 | Vice Chair. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. The Second District's economy retained strong momentum going into 1999, with price pressures largely in check. Private sector job growth in New York and New Jersey accelerated to a 3.1 percent annual rate in the fourth quarter. New York City registered its strongest annual job growth on record,... | 1,016 |
fomc | 1,999 | Governor Gramlich. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. I felt the fourth-quarter growth statistics were significant news. They pushed the slowdown further into the future. There is still a slowdown in both the Greenbook and the Blue Chip forecast but it is smaller. The Greenbook now has only one quarter of growth below 2.5 percent. It seems to be n... | 763 |
fomc | 1,999 | Governor Ferguson. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. As we start the new year, we are clearly faced with a different situation from the one we faced last year, and we probably will have some difficult decisions to make in the not-too-distant future. Last year, our forecast of slowing obviously was being driven by external events; now we have a fo... | 927 |
fomc | 1,999 | Governor Kelley. | 3 |
fomc | 1,999 | Thank you. Mr. Chairman, I would not have thought it possible, but somehow the Committee's policy dilemma continues to deepen rather than to show signs of beginning to resolve itself. The economy continues to surge ahead. We all, or at least most of us, believe that it should and will slow. But we have had good reason ... | 418 |
fomc | 1,999 | Thank you. We are running a little behind schedule but not by much. We will adjourn until 9:00 a.m. tomorrow. | 29 |
fomc | 1,999 | We will turn to Tom Simpson for a presentation on the Humphrey-Hawkins ranges for 1999. | 22 |
fomc | 1,999 | Thank you, Mr. Chairman. The Committee must decide whether to adopt the provisional money and debt ranges it chose last July or to modify them. In the Bluebook, we did not present alternatives to the provisional ranges because of the Committee's previous skepticism about the reliability of the relationship between thes... | 1,582 |
fomc | 1,999 | Questions for Tom? | 4 |
fomc | 1,999 | In Exhibit 4, what does a negative t-statistic mean? Does that mean that there's a negative sign? | 23 |
fomc | 1,999 | The coefficient has turned negative. | 6 |
fomc | 1,999 | Tom, is there any evidence to suggest that the big surge in velocity that occurred, contrary to expectations, from opportunity costs in the early 1990s may be in the process of reversing itself? | 40 |
fomc | 1,999 | That's a possibility, but it is rather hard to come up with the economic intuition as to why that might be happening. | 24 |
fomc | 1,999 | Any more so than was the case with respect to the economic intuition in 1990? What happened subsequent to 1990 was far more of a surprise than a reversal would be today, if I may put it that way. | 46 |
fomc | 1,999 | I think that by 1991 we were beginning to get some sense of what was going on--specifically, that banks were getting into the mutual fund business. Mutual funds in particular were much more freely available to households, and households were diversifying their portfolios out of deposits. That was encouraged at the time... | 88 |
fomc | 1,999 | We knew about that but we didn't forecast a change in the gap between opportunity costs and M2 velocity as a consequence, as I recall. | 28 |
fomc | 1,999 | If you look back at our forecasting in 1990 and 1991, that development caught us somewhat by surprise. But toward the end of 1991 and in 1992 we were doing a better job of forecasting. | 46 |
fomc | 1,999 | You were putting in add factors. | 7 |
fomc | 1,999 | Yes, because we knew that the world had changed, so the old equations weren't working. Exactly. | 20 |
fomc | 1,999 | I must say that I have not changed my view that inflation is fundamentally a monetary phenomenon. But I am becoming far more skeptical that we can define a proxy that actually captures what money is, either in terms of transaction balances or those elements in the economic decisionmaking process which represent money. ... | 155 |
fomc | 1,999 | It's up to you. You need to do two things here. One is to decide whether to readopt the ranges you had on a provisional basis. If people have views on that, maybe while they are giving those views they can also comment on- | 50 |
fomc | 1,999 | Let me suggest the following: If we are all of the same view as we were the last time--to stay essentially with the noninflationary or price stability ranges for M2 and M3--maybe we can get that out of the way and then discuss what to do with debt. If it turns out after we go around the table that we have significant d... | 196 |
fomc | 1,999 | I would stay with the preliminary ranges because I don't feel that I have any basis for a new set of targets. [Secretary's note: In the subsequent go-around, all Board members and Reserve Bank Presidents indicated that they concurred with Ms. Rivlin's statement.] | 54 |
fomc | 1,999 | On the debt range, we have a little inconsistency. What would be your recommendation on what to use for debt? | 24 |
fomc | 1,999 | I think you've done very well with what you have been doing. No one has really noticed this inconsistency. [Laughter] Seven months ago I gave up on this! | 35 |
fomc | 1,999 | What specifically are we using for debt? | 8 |
fomc | 1,999 | The preliminary range was 3 to 7 percent, and the projection is that growth in debt will be right in the middle of that range. | 29 |
fomc | 1,999 | Does anybody disagree with adding the debt range to the vote on the M2 and M3 ranges? Hearing no objections, I suggest we vote on the three of them. | 34 |
fomc | 1,999 | Do you want me to read the directive language? | 10 |
fomc | 1,999 | Yes, please. | 4 |
fomc | 1,999 | The language is shown in the Bluebook on page 23 under the heading "1999 ranges": "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. In furtherance of these objectives, the Committee at this meeting established ranges for... | 157 |
fomc | 1,999 | Call the roll. | 4 |
fomc | 1,999 | Chairman Greenspan Yes Vice Chairman McDonough Yes President Boehne Yes Governor Ferguson Yes Governor Gramlich Yes Governor Kelley Yes President McTeer Yes Governor Meyer Yes President Moskow Yes Governor Rivlin Yes President Stern Yes | 45 |
fomc | 1,999 | Let me take a minute to explain this issue of the Humphrey-Hawkins reauthorization. Unbeknownst to 104 percent of the world, [laughter] a piece of legislation went through the Congress a few years ago which effectively sunset virtually every report required to be issued by various governmental agencies. One reason it h... | 165 |
fomc | 1,999 | It is the reporting requirement that expires, not the goals of the Federal Reserve Act. This doesn't have anything to do with the goals of maximum employment, price stability- | 33 |
fomc | 1,999 | I understand. Do you know offhand if our testimony is included in the reporting requirements? How is that stipulated? | 23 |
fomc | 1,999 | The way the Federal Reserve Act reads, we are supposed to submit this report on a semi-annual basis and then we are to consult with the Congress on the report. The "consulting with the Congress" has meant the testimony. If there is no report, it is hard to see how there is any obligation to testify on anything. | 68 |
fomc | 1,999 | So, effectively, one can read the sunsetting as applying to both the report and the testimony? | 20 |
fomc | 1,999 | That is my understanding. | 5 |
fomc | 1,999 | Clearly, when that information rolled its way onto somebody's agenda, it created a few sparks. The general presumption was that there would be some automatic rollover or reauthorization of the Humphrey-Hawkins reporting requirements and that would be that. Someone asked the newly ensconced Chairman of the Senate Bankin... | 392 |
fomc | 1,999 | I think it is inconceivable that you will not be asked. | 14 |
fomc | 1,999 | I guess that's right. So, it would be helpful to hear from you on any change that you think might be useful. Obviously, the sooner you bring it up, the better, but it need not be today. Having said that, if anyone has any thoughts at the moment triggered by the memo that was sent to you earlier, it might be useful to g... | 98 |
fomc | 1,999 | I'd just like to comment on the broad issue rather than make specific suggestions for change. One of the criticisms traditionally leveled at the central bank is that we are a peculiar institution in a democracy in that we are not accountable and somehow are out there on our own. While the Humphrey-Hawkins reporting has... | 250 |
fomc | 1,999 | Yes, I think the few people I have talked to on this subject would fully agree with you on that. If anything, we ought to over-emphasize that particular point because that is the crucial part of the Humphrey-Hawkins Act, even if there are elements within it, which I suspect there are, that are just fillers and do not r... | 117 |
fomc | 1,999 | I am totally in agreement with what Ed Boehne has said. I think there is a real downside risk if we do not report on a frequent basis to the Congress. We do have our autonomy to be concerned about. If we are not accountable, that can be taken away. We have to demonstrate that we think about the right things and that ou... | 180 |
fomc | 1,999 | Brian Madigan has copies of Section 2A of the Federal Reserve Act, which covers that. Why don't you pass them out, Brian. | 29 |
fomc | 1,999 | I think a lot of it relates to our interpretation, as distinct from what is statutorily required. | 21 |
fomc | 1,999 | Right. Obviously, the monetary aggregates ranges are in there, but so is the requirement to take account of past and prospective developments in employment, unemployment, production, investment, real income, productivity, international trade, payments, and prices. And there is the point about discussing the relationshi... | 69 |
fomc | 1,999 | So we have to weigh that Report, which we get after it is given to Congress. And as far as the staff is concerned, almost all of that is required as opposed to things we have added? | 41 |
fomc | 1,999 | To a considerable extent we feel they are required. The Act has been amended over the years to include additional emphasis on international developments. In response to that, we have beefed up the international sections. | 40 |
fomc | 1,999 | Obviously, our treatment of a lot of things included in that list probably could be modified in some way or another. | 23 |
fomc | 1,999 | That is the type of recommendation that would be helpful for me to get. | 15 |
fomc | 1,999 | I figured that might be what you had in mind. | 11 |
fomc | 1,999 | I have my own ideas, but it would be very helpful to me to get a good sense of the Committee's thoughts, as distinct from my own, on any specific issue. I might be unaware of strong support for including certain things that I thought people might not want to include. So I would like to get a sense of the Committee's vi... | 71 |
fomc | 1,999 | I can't comment on all the details, but there is one thing I'm sure we ought to do. We ought to convey the view that while there may be real information in the monetary aggregates conceptually, we believe the specific ranges suggest a precision about our knowledge of the relationship of those ranges to economic perform... | 110 |
fomc | 1,999 | President Broaddus. | 5 |
fomc | 1,999 | I don't have a lot of detailed suggestions, Mr. Chairman. More generally, a key point to me about the Humphrey-Hawkins reports, which we do twice a year, is that they are very useful both internally and externally from the standpoint of developing a strategy. Naturally, at our FOMC meetings we are focused on current de... | 469 |
fomc | 1,999 | President Parry. | 4 |
fomc | 1,999 | I agree with much of what has been said. Just to add to a point that Cathy Minehan was making: This does seem to present us, as a Committee, with an opportunity to discuss in the testimony what we think the role of the aggregates should be. We have spent a great deal of time over the years talking about this issue, and... | 122 |
fomc | 1,999 | Vice Chair. | 3 |
fomc | 1,999 | Mr. Chairman, it seems to me that everybody here is in agreement that the Humphrey-Hawkins testimony is a great opportunity and should be continued. I have a little difficulty, just procedurally, hearing people say they like this, that, or the other thing because that results in a disorderly debate. People make suggest... | 168 |
fomc | 1,999 | The difficulty is that the February 23 testimony is before our next meeting. One possibility is for Don Kohn to send around a questionnaire and list the various suggestions that would involve changes to the statute. Changes on things not mandated by statute we can make any time we want. | 55 |
fomc | 1,999 | I was of the impression that at the testimony on February 23 you would be asked what you thought and you would give a generic answer that the testimony is appropriate and that we will be thinking of suggestions on the content of the reauthorizing legislation. | 50 |
fomc | 1,999 | Yes, I could do that. In fact, that is what I would plan to do. What do you think, Don? | 26 |
fomc | 1,999 | I think this could be a two-stage process. That is, you could make it very clear on February 23 that the FOMC strongly supports the continuation of a reporting regime of some sort embedded in law. And you could say that we would be more than happy to work with the Congress over time on designing a reporting regime that... | 127 |
fomc | 1,999 | That strikes me as a quite reasonable approach. | 9 |
fomc | 1,999 | Yes. | 2 |
fomc | 1,999 | Why don't we leave it there, then? | 9 |
fomc | 1,999 | May I raise a technical point as a word of caution? If we start to indicate what we would like future Humphrey-Hawkins reports to include, in terms of what we would want specified in the law, we will not get the last word. They will. Every member of the Banking Committee is going to have an idea about what ought to be ... | 140 |
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