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fomc | 1,999 | We have that worry, too. | 7 |
fomc | 1,999 | I think we have to find a way consistent with our regulations that allows the banks to do exactly what we want them do to--that is, to bring in the funds and recycle them even though they will blow up their balance sheets as a result. Work is going on in the System now on how to handle that problem. | 65 |
fomc | 1,999 | Any further questions on open market operations? If not, who would like to move to ratify the domestic transactions? | 23 |
fomc | 1,999 | So move. | 3 |
fomc | 1,999 | Without objection they are approved. Mr. Fisher, you wanted to discuss our swap arrangements with Canada and Mexico. | 22 |
fomc | 1,999 | Yes, I sent the Committee a memo on May 13 about the renewal of our swap arrangements with Mexico and Canada that were established under the North American Framework Agreement. A reading of the fine print--indeed Mr. Truman's reading of the fine print--made us realize that under the terms of these swap arrangements 6 m... | 160 |
fomc | 1,999 | Questions for Peter? If not, would somebody like to move that? | 14 |
fomc | 1,999 | Move approval, Mr. Chairman. | 7 |
fomc | 1,999 | Is there a second? SEVERAL. Second. | 11 |
fomc | 1,999 | Without objection. Thank you very much. Let's turn now to Mr. Prell. | 17 |
fomc | 1,999 | Thank you, Mr. Chairman. The April Consumer Price Index, published the day after we printed the Greenbook, obviously is occupying center stage in the financial markets and I would guess that it's a pretty prominent question mark for many of you today. But, before getting into the nuts and bolts of that report and our i... | 1,861 |
fomc | 1,999 | Mike, in line with the notion you raised about the inability of maintaining the seasonally adjusted level of housing starts as we move into the period where the seasonals start to rise, I do recall that the unadjusted April starts figures were down. Were the permits down unadjusted? | 58 |
fomc | 1,999 | I don't have any additional detail beyond the knowledge that total starts were down something under 3 percent in April. | 22 |
fomc | 1,999 | Unadjusted starts? | 5 |
fomc | 1,999 | Yes. But, given that the level of starts looks low relative to permits at this point, I suspect that in reality we probably did not have an unadjusted decline in permits. That is a rough judgment at this point and I don't have the additional data to refine that immediately. | 57 |
fomc | 1,999 | You don't recall whether the permits, unadjusted, were down? | 14 |
fomc | 1,999 | I don't have that information. | 6 |
fomc | 1,999 | We do have that? | 5 |
fomc | 1,999 | Yes, we do. | 5 |
fomc | 1,999 | Okay, it is not crucial. Does anyone remember whether or not the seasonal for May goes up over the April seasonal? | 24 |
fomc | 1,999 | I think the seasonals do continue to move in that direction to some degree. I have those numbers with me, so let me check. Well, actually, the seasonal factor in May is about the same as in April and then June is the low point for the seasonal factor. It is just a little lower. We have had the major swing in the season... | 79 |
fomc | 1,999 | Really from February to April is the big surge? | 10 |
fomc | 1,999 | It's basically February to April. The surge starts in February, but from January to April is the story. | 21 |
fomc | 1,999 | Other questions for Mike? President Moskow. | 9 |
fomc | 1,999 | Mike, I want to ask you about your statements regarding productivity. That, of course, is something in which we are all very interested. I thought I heard you say in your comments that because of structural improvements and efficiencies you have added several tenths onto your productivity forecast for 1999 and 2000. Pa... | 158 |
fomc | 1,999 | On the first question, part of the increase in the productivity growth that we have in our forecast reflects the stronger demand trends and the cyclical component. I would say that a little more than half, roughly, of the increase in productivity growth going forward is attributable to the more positive view we have of... | 357 |
fomc | 1,999 | I agree that it is not radically high in an historical context; but compared with three or four years ago when we were talking about a 0.9 percent increase in productivity on average, it is a very significant difference. | 45 |
fomc | 1,999 | Some of this reflects changes in measurement--the introduction of new weighting that has altered the history by a few tenths. But, as we look at it, we also had a period in the late 1980s and early 1990s when in particular capital was shallowing, and the low levels of investment did not help to boost productivity in th... | 236 |
fomc | 1,999 | President Parry. | 4 |
fomc | 1,999 | Mike, I have two questions, and the first one is on productivity as well. Estimates of the productivity trend seem to have been revised quite frequently in the last few years. To me, this suggests greater uncertainty about the productivity forecast. Wouldn't you have to conclude that the uncertainties associated with o... | 79 |
fomc | 1,999 | If the locus of the uncertainty is productivity, I'm not sure that we are more uncertain about it now than we were three years ago or six years ago. I think there has always been a considerable band of uncertainty around the prospects for productivity. We were puzzled by why productivity gains were so low for many year... | 139 |
fomc | 1,999 | The second question relates to the fact that the Y2K effect in the Greenbook forecast appears quite large. Compared with the consensus of Blue Chip forecasters, for example, it is considerably larger. Do you want to comment a little on what your thought process was? | 54 |
fomc | 1,999 | This is an area where many forecasters have been reluctant to take a position, and thus it probably hasn't shown up in their forecasts. I know that the National Association of Business Economists just completed a poll of their members, and they indicated that they expected about a 1/4 percent addition to third-quarter ... | 358 |
fomc | 1,999 | Thank you. | 3 |
fomc | 1,999 | President Poole. | 4 |
fomc | 1,999 | I have a question about the outlook for investment, which is driven importantly, as it should be, by acceleration considerations. My sense is that investment has been very strong both because of the labor market tightness and the need to substitute capital for labor and because of the attractiveness of new technologies... | 194 |
fomc | 1,999 | I would say that we have some reasonable anchors for our assessment of capacity utilization. The series is periodically benchmarked to Census data in which companies report what they perceive to be their level of capacity utilization based on a given definition. That definition has been uniform over time, so we think w... | 306 |
fomc | 1,999 | I remember that steel issue. My recollection is that a lot of plant managers knew at the time that they had open hearth furnaces and rolling facilities which were clearly of an earlier age. It would be interesting to know whether in the Census Bureau data, as distinct from the American Iron and Steel Institute data, th... | 188 |
fomc | 1,999 | There is a strong tendency on these forms for people to put in about the same number they did last year, as we all know. | 27 |
fomc | 1,999 | Sure. But I think the point that Mike is making is that we don't project capacity independently. What is projected is the operating rate. We get capacity by division, and that is essentially-- | 38 |
fomc | 1,999 | That is true of the estimation of capacity utilization up to a point. | 14 |
fomc | 1,999 | Then you smooth it out. | 6 |
fomc | 1,999 | Then we look at investments and so on to judge what capacity growth would be going forward. I think the question they are asked to answer is what is their capacity utilization rate given a normal operation of their plants, not allowing for additions of extra shifts and those sorts of things. It is a question that is co... | 98 |
fomc | 1,999 | The point is that it may be consistent over time, but you don't want it to be consistent over time if the underlying pace of technology has suddenly changed dramatically. A whole lot of new technology is coming in. That's not unlike the change in the exchange rate in the early 1980s, which permanently put under water a... | 74 |
fomc | 1,999 | They are not reporting that they have the same capacity as before nor that they are using the same amounts as before, but the question they are responding to is consistent. So, conceptually what they are trying to measure is consistent over time. As I said, I just don't see anything that looks particularly odd in the v... | 74 |
fomc | 1,999 | We have two measures--the ones I assume you are talking about--which are the lead times on the deliveries of materials and the number of items in short supply. The lead times are stretching out some, especially in steel with the prospect of a steel strike. The number of items in short supply, which are reported on a re... | 118 |
fomc | 1,999 | The other point to raise is one that the Chairman reiterated in a speech recently. And that is, if you see incipient labor cost pressures, how readily can you adjust the productive capacity of your plant? How quickly can you purchase and install capital goods? That is another element that one would have to think about ... | 124 |
fomc | 1,999 | Unadjusted? | 4 |
fomc | 1,999 | Yes, unadjusted. | 6 |
fomc | 1,999 | President Minehan. | 4 |
fomc | 1,999 | I have a couple of questions about some issues that have been talked about already. First, on the Y2K effect, you have GDP growth moving from somewhere in the high 2 percent to the middle 3 percent area through 1999 down effectively to zero in the first quarter of 2000. That seems to be driven both by the change in bus... | 114 |
fomc | 1,999 | Need I say more? [Laughter] I wish I could! We are flying blind again. Maybe we are overly influenced by our experience with snowstorms in Washington D.C. when everybody runs out and buys milk and toilet paper and cleans off the shelves of the grocery stores. I think we should expect, even if we don't get all kinds of ... | 251 |
fomc | 1,999 | Do you recommend that we move our February FOMC meeting back to December? [Laughter] | 20 |
fomc | 1,999 | From what I understand about the thorough preparations that people are making at the Federal Reserve Board, I suspect we would be able to meet here even on January 2nd if we wanted to. | 38 |
fomc | 1,999 | I was just wondering whether people will be building up an inventory at home of some of the same things that businesses will be building and how much double counting there might be. | 34 |
fomc | 1,999 | We have allowed for that on a very limited scale in both cases. | 14 |
fomc | 1,999 | The other thing I wanted to ask you about is the distinction you draw between the productivity that is driven by additional demand and that which reflects some underlying trend increases. I am wondering how it is that we can be at all sure about that. I know from our own business advisory councils that in many differen... | 263 |
fomc | 1,999 | It is obviously very difficult and it is a judgment call. But I think the kind of situation you are describing, though complicated, is one reason to anticipate that at least some companies will hire additional workers. You say companies are working beyond sustainable levels of labor utilization, but you also say they a... | 136 |
fomc | 1,999 | And they would be entry workers. | 7 |
fomc | 1,999 | And that would be a source of a cyclical weakening in productivity. On the other hand, there is still obviously a very strong culture of cost control--that may be your first group--and managers will do absolutely anything they can do to keep their labor force to an absolute minimum. And where they use temps and other c... | 91 |
fomc | 1,999 | I think there is a distinction here on which we cannot put a number, but we can get a judgment. The point I was making at Mike Moskow's conference earlier this month, and I may have mentioned it at our last FOMC meeting as well, strikes me increasingly as the really crucial element in making that differentiation. A num... | 328 |
fomc | 1,999 | Right. | 2 |
fomc | 1,999 | Further questions for Mike? If not, would somebody like to start the go-around? President Broaddus. | 22 |
fomc | 1,999 | Mr. Chairman, the Fifth District economy remains robust overall. I think I have probably started my comments at the last eight or nine FOMC meetings with that same statement. | 35 |
fomc | 1,999 | I don't know why I even ask for your report! [Laughter] | 15 |
fomc | 1,999 | Nevertheless, that is definitely the case. But, if anything, there seems to be some evidence of a possible acceleration in activity over the last several weeks. Manufacturing is still a very important part of the economic base in our region; you name it; we make it in the Fifth District. And manufacturing activity clea... | 1,086 |
fomc | 1,999 | You've made it impossible for anyone else to come after you! [Laughter] Who wants to try? President Moskow. | 25 |
fomc | 1,999 | I was hoping it was not going to be me! [Laughter] The Seventh District economy continues to expand at a moderate pace. However, we are starting to see some subtle changes. Consumer spending remains healthy and housing activity is at high levels, but we are now seeing a few signs of moderation in these areas. Condition... | 721 |
fomc | 1,999 | President Parry. | 4 |
fomc | 1,999 | Mr. Chairman, economic growth in the Twelfth District has shown some signs of moderation, but it is still rapid. In Nevada and Arizona, the pace of job growth has slowed somewhat from last year's very fast pace, but these states still rank first and third in terms of employment growth over the past twelve months. In th... | 631 |
fomc | 1,999 | President Jordan. | 3 |
fomc | 1,999 | Thank you. Discussions with directors and advisory council members since our March 30 meeting have gone in the direction of reconfirming that the regional economy is very strong. Even the communities that are most influenced by steel, which had been registering some concern earlier, have reported that business conditio... | 1,656 |
fomc | 1,999 | President Hoenig. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. The economy in the Kansas City District remains quite strong: Employment edged up again in March; retail sales remain generally strong; and construction indicators are quite strong. The price of construction materials has increased significantly so far this year, both in the region and more bro... | 930 |
fomc | 1,999 | President McTeer. | 5 |
fomc | 1,999 | Little has changed in the Eleventh District economy since our March meeting. Overall, the economy in our region continues to show healthy growth. Over the last six months employment growth has averaged about 3 percent, and the near-term outlook is for more of the same. Activity in both commercial and residential constr... | 692 |
fomc | 1,999 | President Poole. | 4 |
fomc | 1,999 | Mr. Chairman, conditions in the Eighth District are largely unchanged. The only significant development is the announcement, which I think everybody is aware of, that Boeing will be laying off about 7,000 workers from a defense plant. But, of course, that business is going to go to some other defense plant; those aircr... | 301 |
fomc | 1,999 | President Stern. | 3 |
fomc | 1,999 | Thank you. The District economy remains robust, which is not a change in conditions. That is true virtually across the board, whether one looks at consumer spending, tourism activity, or manufacturing activity. Construction is very strong, both residential and commercial, and houses are selling as soon as they hit the ... | 476 |
fomc | 1,999 | President Guynn. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. The Southeast economy continues to operate at a very high level of utilization and that constrains us from experiencing the kind of growth rates that we saw earlier in the expansion. Recent retail sales gains in our area have been modest, and single-family housing activity has been up only slig... | 1,076 |
fomc | 1,999 | President Boehne. | 5 |
fomc | 1,999 | Thank you, Mr. Chairman. The regional economy of the Philadelphia District remains on an upward trend. Manufacturing is strengthening. Retailers report growth in sales. Construction has been increasing. Business lending has picked up. Labor markets remain tight in most areas. Apart from oil and tobacco prices, inflatio... | 322 |
fomc | 1,999 | President Minehan. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. New England's economy remains much the same as it has been for the last several meetings. The region's job growth continued to be slower than the nation's but the unemployment rate is well below the nation's as well. The supply of labor continues to be a concern. Jobs would grow faster if there... | 863 |
fomc | 1,999 | Vice Chairman. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. The Second District's economy continues to grow at a sturdy pace, with few signs of increased price pressures. Private sector employment grew at a 1.8 percent annual rate in the first quarter; that's down from 2.2 percent in the fourth quarter of last year. Retailers report that sales were at o... | 923 |
fomc | 1,999 | Governor Kelley. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. At the last meeting, and indeed for some time before that, it seemed that the risks to the outlook were balanced, with a slow, steady drift to the upside. That continues with little sign of a significant moderating trend setting in. Like others, I have been expecting such a shift for a long tim... | 484 |
fomc | 1,999 | Governor Gramlich. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. For the last few meetings, I have been trying to determine rules of thumb or guides for how we should be making our decisions. The Taylor Rule, a favorite of many academic economists studying monetary policy, does not work well when it is difficult to define operating targets for inflation or u... | 814 |
fomc | 1,999 | Governor Ferguson. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. I, like others, have come to recognize that the forecast outcome is quite desirable, but I think the risks are really to the upside. A number of people have already talked about the CPI. I agree with Mike Prell in that the latest CPI number does not to me indicate that the day of reckoning has ... | 697 |
fomc | 1,999 | Governor Meyer. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. I continue to be impressed by the recent exceptional growth in productivity. The case for an increase in trend productivity growth is now more compelling after the strength in productivity over the last five quarters--and especially after the last two quarters--than it was based on the data for... | 841 |
fomc | 1,999 | Governor Rivlin. | 4 |
fomc | 1,999 | I was quoted in a recent New Yorker article, one of the flood of articles on our Chairman and the new era, as being "mystified in a pleasant way by the recent performance of the economy." I think that describes the mood that has captured this group for quite a while now. Now, we weren't mystified about everything. Much... | 523 |
fomc | 1,999 | Thank you. I think coffee awaits! | 8 |
fomc | 1,999 | Mr. Kohn. | 5 |
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