Source stringclasses 1
value | Date int64 1.98k 2.01k | Text stringlengths 2 27.1k | Token_count int64 1 5.57k |
|---|---|---|---|
fomc | 1,999 | That is indeed a thoughtful comment. | 7 |
fomc | 1,999 | That's a good point. | 5 |
fomc | 1,999 | The more I think about it, the more it strikes me as being subtly obvious. | 17 |
fomc | 1,999 | Yes, I agree. | 5 |
fomc | 1,999 | We may actually be better off with the same legislation. | 11 |
fomc | 1,999 | We can make some changes without changing the Act. | 10 |
fomc | 1,999 | We can make a lot of changes ourselves because the statute itself is not all the explicit. | 18 |
fomc | 1,999 | I think Alice has spoken wisely; I think she's right. | 12 |
fomc | 1,999 | You earned your pay today! President Moskow. | 10 |
fomc | 1,999 | I think Alice's caution is very well stated. In looking at this though--and this is really the first time I have looked at it carefully--I assume this is the entire reporting requirement. | 39 |
fomc | 1,999 | That is the Act. | 5 |
fomc | 1,999 | The section is entitled "Monetary and Credit Aggregates." All the reporting is under monetary and credit aggregates, which is rather ironic given the discussion we just had about the limitations of the aggregates themselves. I recognize that there is some risk in trying to come up with changes to this, but it really is... | 106 |
fomc | 1,999 | If none of us has read it, you can rest assured very few other people have. [Laughter] | 22 |
fomc | 1,999 | I'm not sure whether that title is something we put on the document or-- | 15 |
fomc | 1,999 | Yes, Virgil Mattingly says it is. | 11 |
fomc | 1,999 | It is our title, not what is in the law. So the next time we reprint the Federal Reserve Act, we can change the title. | 30 |
fomc | 1,999 | Can we legally do that? | 6 |
fomc | 1,999 | Yes. | 2 |
fomc | 1,999 | It is just an editorial- | 6 |
fomc | 1,999 | That is not in the literal Act itself? I am learning things that I did not know. | 19 |
fomc | 1,999 | Let's do it tomorrow. Why wait? | 8 |
fomc | 1,999 | I am learning all these things, though I'm not sure of what conceivable value they are. [Laughter] Why don't we leave this issue for now. I think Alice has raised a more fundamental question. Let's think about it for a while and then Don Kohn can poll us before the hearing to get a sense, at least, of how we would like... | 110 |
fomc | 1,999 | Thank you, Mr. Chairman. I will begin my briefing today with a discussion of the simulations presented in the Bluebook, and I will be referencing the charts in the Bluebook in the process. These exercises were designed to shed light on the economic and policy environment embedded in the staff's Greenbook forecast, and ... | 1,954 |
fomc | 1,999 | Questions for Don? President Parry. | 8 |
fomc | 1,999 | Don, I have a couple of technical questions and then a comment. On page 10 of the Bluebook there is a reference that says "the real funds rate is now at its natural rate." I am familiar with what an equilibrium real rate is; I don't know what a "natural" funds rate is. | 63 |
fomc | 1,999 | I was using it as a synonym for the equilibrium real rate, as in the "natural rate" of unemployment--the same thing. | 27 |
fomc | 1,999 | Turning to Chart 4, the top right-hand chart, I was a little surprised at the difference in real funds rates in the simulations, particularly the one called "Lower NAIRU." Why would that produce analytically such a different real equilibrium rate? The equilibrium rate has to be there somewhere. Do these converge in som... | 101 |
fomc | 1,999 | Let me address the first question first: Why is the rate with the lower NAIRU lower than the other two? | 24 |
fomc | 1,999 | Or why is the nominal rate so low in that simulation? | 12 |
fomc | 1,999 | The reason is that the economy can produce at a substantially higher level with a NAIRU that is one percentage point lower than assumed in the baseline. As a consequence, interest rates need to be lower to stimulate the demand to use that additional production. That is a level adjustment of production out into the infi... | 108 |
fomc | 1,999 | Don, I might suggest that another way to think of this is as follows: If the NAIRU is really more like 41/2 percent, we might be around the NAIRU now and looking at the prospect of a steady inflation path, which is the sign that we are essentially around the natural rate of interest. That's different from what is in ou... | 106 |
fomc | 1,999 | I see. | 3 |
fomc | 1,999 | As for the level of the natural rate, it is higher than it has been in some of the past forecasts, although as I noted it drifts down over time as the wealth-to-income ratio drifts down. I think the height is a result of the fact that the wealth-to-income ratio is a lot higher than we thought it was--or thought it was ... | 205 |
fomc | 1,999 | Interesting. I have a comment about the simulations. They suggest that we are going to have to make decisions in the next year or so that indicate whether or not we are serious about price stability. Secondly, if I can go back to one of my favorite topics, which is opportunism--clearly locking in the gains to date--the... | 81 |
fomc | 1,999 | Except for that price stability one, which does a little more than lock them in, that's right. But that is the underlying premise of the staff forecast that you all talked about yesterday: That the economy is producing a bit beyond its potential. How much beyond is unknown, but it's somewhat beyond. In the staff foreca... | 139 |
fomc | 1,999 | It is very troubling that PCE inflation is 23/4 percent in all of the alternatives but one. In that one it is 2 percent. | 31 |
fomc | 1,999 | Right. | 2 |
fomc | 1,999 | Thank you. | 3 |
fomc | 1,999 | The same simulations five years ago had a wholly different level with the same model, as I recall. | 20 |
fomc | 1,999 | That is true. You only know what you know at a given time. | 15 |
fomc | 1,999 | Vice Chair. | 3 |
fomc | 1,999 | Mr. Chairman, during my years in Chicago, I know I chatted with Milton Friedman about the natural rate of unemployment, but I have managed to spend about 58 years of my life without ever hearing that the NAIRU was confusing economists by its existence. So, taking advantage of not being a Ph.D. economist, let me tell yo... | 382 |
fomc | 1,999 | I wondered whether that was a question or not! [Laughter] | 14 |
fomc | 1,999 | I had to put in a question mark at the end because this is the time for questions. My question is: Would the gentleman not agree? [Laughter] | 33 |
fomc | 1,999 | The gentleman would agree. A key element in interpreting what has happened over the last few years is this: To what extent has there been a fundamental shift in the structure of labor and product markets that will persist? And to what extent do the favorable results of the last few years stem at least partly from facto... | 360 |
fomc | 1,999 | In a sense there is some link between what you just said and what the Chairman said earlier. I may not have known exactly what charts the Chairman had in mind from prior years' simulations, but if you view what has happened as having benefited from some supply-side shocks, basically those things have become engrained i... | 239 |
fomc | 1,999 | If I could make a comment: I think an appropriate degree of skepticism is no doubt appropriate. [Laughter] | 23 |
fomc | 1,999 | As always. | 3 |
fomc | 1,999 | That is by definition a safe statement! President Hoenig. | 12 |
fomc | 1,999 | Don, having looked at the analysis in the Bluebook and at the various charts, including Chart 3, and having listened to your comments this morning, I want to talk a little about something I mentioned yesterday. That is the possibility of wanting to unwind the actions we took earlier. Last fall we were projecting growth... | 190 |
fomc | 1,999 | I mentioned it as a possibility. That is, to the extent that you were buying insurance against a hurricane and the hurricane season has passed and you don't expect another season, then you don't need the insurance. But in part the decision involves a judgment, in terms of the risks, as to whether the hurricane season r... | 230 |
fomc | 1,999 | That's a good point. | 5 |
fomc | 1,999 | Governor Gramlich. | 4 |
fomc | 1,999 | I'd like to address the point that Bob Parry brought up on whether we have locked in progress on inflation. Let me refer everybody to Chart 13 that Dave Stockton showed yesterday. The bottom panel of that chart shows that if we take out food and energy in the PCE and use the capacity utilization approach, which is in e... | 190 |
fomc | 1,999 | I don't understand that. | 5 |
fomc | 1,999 | Well, in Chart 13 the inflation rate actually goes down. | 13 |
fomc | 1,999 | What about its behavior in terms of the long-run simulation on Chart 4 of the Bluebook? | 20 |
fomc | 1,999 | Chart 13 is a long-run simulation of PCE without food and energy, and the inflation rate actually goes down in that simulation. Apparently the only reason it goes up in Chart 4 is food and energy. So if we lock in the endogenous part of prices, leaving aside food and energy, then I think we could arguably say that this... | 78 |
fomc | 1,999 | But that's not true in terms of the long-term simulation shown on Chart 4, which goes beyond the year 2000. | 26 |
fomc | 1,999 | They give slightly different results. | 6 |
fomc | 1,999 | If you thought that the capacity utilization equation was the more accurate equation in terms of predicting PCE, then as you remarked yesterday, Governor Gramlich, it would be very much like the lower NAIRU situation. It would indicate that the structure of the economy had changed and that capacity utilization was a be... | 85 |
fomc | 1,999 | You don't even need a structural change. If somehow, for reasons we don't understand, capacity utilization really is the true measure rather than the unemployment rate, then that simulation reflects the fact that the level of economic activity is actually below the natural rate of capacity utilization. There is slack i... | 166 |
fomc | 1,999 | So, for these purposes any differences are small, they are hard to predict in the long run, and they may not concern us too much. | 29 |
fomc | 1,999 | I would just add a note of caution on the basis of bitter experience, which does not have to be repeated admittedly. When one studies the history of the past few cycles, it is not unusual to see a tendency to reinterpret capacity constraints because the inflation turnaround isn't in sight. I think it is manifest in the... | 166 |
fomc | 1,999 | Governor Rivlin. | 4 |
fomc | 1,999 | This is not so much a question as a plea for perhaps a different structuring of the problem next time around. I think the difference between the world depicted in Charts 3 and 4 is very interesting, but it becomes dramatic only if one assumes that we stay with the policy implied by one or the other for a very long time... | 181 |
fomc | 1,999 | President McTeer. | 5 |
fomc | 1,999 | When I raised my hand, I didn't know there would be so many people talking after Bill McDonough. I basically wanted to associate myself with his remarks. I would associate myself with Alice Rivlin's comments, too. We now have had three years during which economic growth has been faster than most people's estimate of po... | 163 |
fomc | 1,999 | Governor Ferguson. | 3 |
fomc | 1,999 | I am struck as I look at Chart 4 that we are being asked to make an either/or decision. That is, we have to think either that the NAIRU has dropped or that adverse price shocks are going to hit us. Is there no simulation that actually suggests some of both--that the NAIRU may indeed be below 5.3 percent, and perhaps at... | 169 |
fomc | 1,999 | We have not done that, though the baseline does do a little of that in the sense that the NAIRU in the baseline is considerably lower than it would have been a couple of years ago. That's part of what the Chairman was talking about. But the baseline does take some of the favorable price and output news as stemming from... | 175 |
fomc | 1,999 | Okay. | 2 |
fomc | 1,999 | I should note that we did the simulation showing the adverse price shocks, the dotted lines in Chart 4, in part to illustrate the power of supply shocks. Those are not very big supply shocks relative to the baseline assumptions. There is a $5 difference in the price of oil and a 1 percent faster growth in benefits cost... | 220 |
fomc | 1,999 | Let me ask one other thing on the locking-in point. Ned was going back to Chart 13, but doesn't the bottom panel of Chart 4 get to the issue of the long term? That strikes me as suggesting that even if one believes the NAIRU has dropped to the 41/2 percent you have assumed there, we will end up in the long run with a P... | 101 |
fomc | 1,999 | If I understand the construction of this--please correct me if I'm wrong, Don--basically this represents the staff's baseline assumptions naturally extended, at least for the near term. Those assumptions include a rebound in oil prices and the turn of the dollar and so on. So in a sense this is already the lower NAIRU ... | 93 |
fomc | 1,999 | Including most importantly the depreciation of the dollar. | 9 |
fomc | 1,999 | Okay, thank you. | 5 |
fomc | 1,999 | President Minehan. | 4 |
fomc | 1,999 | I am attracted somewhat to the construct that Alice talked about of not really knowing where we are between Chart 3 and Chart 4, because I really don't know how much of the good news we have been hearing for the last couple of years is temporary or permanent. But I am drawn to thinking about where we were last August o... | 349 |
fomc | 1,999 | One reaction, though, is that in a sense you are beginning to bring Chart 5 into the picture. | 22 |
fomc | 1,999 | Yes. | 2 |
fomc | 1,999 | That raises the question of whether some of the demand-shock surprises we have been experiencing will be sustained. My sense of the discussion yesterday, as we were thinking about the coloration of the Humphrey-Hawkins report, is that this group might see greater risks that we will have stronger demand, other things eq... | 99 |
fomc | 1,999 | President Boehne. | 5 |
fomc | 1,999 | This is really a question, even though it might sound like a comment! [Laughter] If we try to choose between the world in Chart 3 and the world in Chart 4, I think we have to be somewhat agnostic and have a fair amount of humility. But as long as we're being humble and as long as we're being somewhat agnostic, how do w... | 282 |
fomc | 1,999 | That proved to be an error, in a sense. The economy got very overheated partly because of the optimism about how low an unemployment rate could be sustained without inflation. To go back to what your eyes have been perceiving, labor markets clearly have been tight and wages have been accelerating. Pressure has been man... | 230 |
fomc | 1,999 | President Poole. | 4 |
fomc | 1,999 | Chart 3 has a price stability simulation, which Chart 4 does not have. I have what I think is a simple question. Roughly speaking, what would the federal funds path be in Chart 4, assuming the NAIRU were lower but the same end result--converging on 3/4 percentage point less inflation per year than the baseline--is desi... | 108 |
fomc | 1,999 | Right. On Chart 3 there is a difference of about 2 percentage points between the inflation rates, and you're talking about a scenario that might result in an inflation rate roughly one percentage point lower than the baseline. So I would take about half the difference between the real funds rates of the two simulations... | 80 |
fomc | 1,999 | So Chart 4 is built under the assumption that we are satisfied to converge more or less on the existing rate of inflation. That addresses the question of what we have to do if the NAIRU is lower, if we're satisfied with where we are on the inflation rate. But for those who have an objective of a lower rate of inflation... | 91 |
fomc | 1,999 | Right. Looking back at Chart 3, you would have to tighten by about 1/2 percentage point, let's say, in the near term, but run with a substantially higher real funds rate over the next couple of years, though not as high as in the price stability case. | 58 |
fomc | 1,999 | A simple rule-of-thumb exercise using our model is that a 100 basis point higher funds rate implemented immediately and sustained would knock about 1/4 percentage point or a little more off the inflation rate in the first year. The inflation rate in the second year would be about 3/4 percentage point lower. I suspect t... | 81 |
fomc | 1,999 | A hundred basis points sounds too-- | 7 |
fomc | 1,999 | I think that would be more than enough to get you there very promptly, so Don's response of perhaps 1/2 percentage point sounds about right. | 31 |
fomc | 1,999 | At the beginning of this trajectory, where we are right now, even if the NAIRU is as low as 41/2 percent we need a higher funds rate to start to work the inflation rate down or we are at risk of actually seeing the inflation rate rise. That is what the baseline tells us even at the current unemployment rate. | 69 |
fomc | 1,999 | Right, that's the lower NAIRU scenario. | 10 |
fomc | 1,999 | Anybody else? If not, let me get started and try to focus on some of the same issues that many of you raised. The Committee discussion that we had yesterday elicited general agreement around the table that, with the exception of energy, agriculture, and some manufacturing and mining industries, the economy has been exh... | 4,265 |
fomc | 1,999 | Mr. Chairman, I fully support your recommendation. Clearly, it seems inappropriate to change policy. And with inflation dead in the water, I also believe this is not the moment to go asymmetric toward tightening. I agree that the Humphrey-Hawkins testimony gives you, representing the Committee, an opportunity to discus... | 85 |
fomc | 1,999 | Governor Rivlin. | 4 |
fomc | 1,999 | I also strongly support your recommendation, Mr. Chairman, for the reasons ably stated by the Vice Chair. But I would be a bit cautious about sending a signal in the Humphrey-Hawkins testimony. We have seen so little inflation that I'm not sure we will see anything in the near term that could convince us that we should... | 71 |
fomc | 1,999 | President Stern. | 3 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.