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fomc | 1,999 | We keep hearing that the yen's appreciation is a result of expectations of a stronger Japanese economy. You just indicated sort of the opposite as far as the United States is concerned--that the change in relative cyclical positions is expected to cause the dollar to depreciate. Why the difference? Why is Japanese stre... | 76 |
fomc | 1,999 | Well, I think the directions are consistent. Generally speaking I would attribute it to expectations about the interest rate consequences of stronger activity in the one economy, not necessarily weaker activity in the United States. The relative change is all that is needed. If the rest of the world begins to operate c... | 152 |
fomc | 1,999 | Capital accounts are becoming more important than current accounts? | 10 |
fomc | 1,999 | Well, more important, less important. The current account goes the same way in that such a move in exchange rates would tend to lessen surpluses that are apparent in Europe and Japan and remedy to some extent deficits in the United States. So in that sense these factors are not in conflict but are just reinforcing one ... | 65 |
fomc | 1,999 | President Parry. | 4 |
fomc | 1,999 | Karen, the recent Greenbook forecast of real GDP for China indicates growth of 3.4 percent in 1999 and 5.4 percent in the year 2000. Of course, those growth rates are much below what China had experienced in the previous five years or longer. Is that consistent with a gradual, as opposed to a sharp, decline in the valu... | 93 |
fomc | 1,999 | In our view, the Chinese authorities will make a discretionary decision about the renminbi. Because of their very strong reserve position and the fact that they are still running surpluses, we don't see market forces triggering an event there. So the decision that they will make at some point in time to introduce some ... | 280 |
fomc | 1,999 | Thank you. | 3 |
fomc | 1,999 | President Poole. | 4 |
fomc | 1,999 | I'd like to pursue a bit more the question that Bob McTeer raised about the role of the current account. We certainly do hear discussion about the exchange value of the dollar moving in the direction of becoming weaker, given that the U.S. current account is in such a substantial deficit. Let me focus on Japan and give... | 381 |
fomc | 1,999 | I hesitate to attempt to do the arithmetic on the spot. My guess is that we would probably say that 10 percent is too large an estimate of the output gap in Japan, in part because a whole decade of largely reduced capital accumulation has had a bearing on the size of that gap. And with labor force growth essentially ze... | 538 |
fomc | 1,999 | Not for want of trying. | 6 |
fomc | 1,999 | Right. | 2 |
fomc | 1,999 | I understand that. | 4 |
fomc | 1,999 | President Stern. | 3 |
fomc | 1,999 | Speaking of prospects for Japan, what is the current and prospective state of play of policy in Japan these days, including their attitude toward intervention, either unilateral or joint? | 33 |
fomc | 1,999 | Of course, that attracted much attention over the weekend of the G-7 meeting and the preceding week and was a factor in some of the buffeting of the yen/dollar rate that occurred. At the moment they apparently have no plans for intervention. Just today, for example, a Japanese official--I've forgotten exactly which one... | 637 |
fomc | 1,999 | Are there any further questions for either of our colleagues? If not, would somebody like to start the general discussion? President Broaddus. | 28 |
fomc | 1,999 | Of course, the principal development in our region since the last meeting was hurricane Floyd. It did some damage in eastern South Carolina but, as I am sure you know from the news reports, the brunt of the storm was borne by eastern North Carolina and the coast of Virginia. Apart from the resort areas on the Outer Ban... | 1,090 |
fomc | 1,999 | President Minehan. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. In line with Al's comments, I'd say the most significant thing that has happened in New England recently had nothing to do with floods, thankfully, but with a golf game, the Ryder Cup tournament. We've seen the impact on the economy of that, but certainly there was an impact from national and i... | 1,164 |
fomc | 1,999 | President Parry. | 4 |
fomc | 1,999 | Mr. Chairman, the Twelfth District's expansion has gained momentum since early in the year. Following moderate growth in the first quarter, job growth picked up to a 2.8 percent rate during the second quarter and that pace was maintained in July and August. Economic activity has been expanding more quickly in Californi... | 971 |
fomc | 1,999 | President Guynn. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. Although the overall pace of growth in the Southeastern region appears to have moderated, our economy still seems to be on a path that is slightly above that of the nation as a whole. Our important and thriving Florida tourism industry dodged the Hurricane Floyd bullet with only a modest tempor... | 106 |
fomc | 1,999 | I'll pass your apology along! | 6 |
fomc | 1,999 | Our energy sector finally seems to be responding to the higher oil prices with some pickup in oil and natural gas drilling, but the increased rig count has not yet had much trickle-down effect on the boat-building and other support businesses. Our contacts in that industry still say, however, that the major players in ... | 987 |
fomc | 1,999 | President Boehne. | 5 |
fomc | 1,999 | Thank you, Mr. Chairman. The regional economy for the Philadelphia District continues to operate at high levels, with tight labor markets and benign inflation. Consumers are spending freely. The market for homes is robust. Recent increases in mortgage rates have caused more homebuyers simply to shift to variable rate m... | 176 |
fomc | 1,999 | Does that mean the price is coming down? | 9 |
fomc | 1,999 | The stress in the health care industry is becoming widespread. Hospitals and medical schools are increasingly squeezed financially. Physicians are more amenable to unionization or dropping out of government insurance programs. Patients are turning to politicians more and more to seek relief from the "deny and delay" ta... | 249 |
fomc | 1,999 | President Moskow. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. The Seventh District economy, with the notable exception of the agricultural sector, remains on a moderate growth path with activity in most sectors at very high levels. A key driving force continues to be the strength in demand for automobiles and light trucks. Sales of light vehicles again we... | 1,060 |
fomc | 1,999 | President Hoenig. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. The Tenth District's economy continues to operate at a relatively high level of activity. Our year-over-year employment growth was 1.3 percent, and that is from already high levels of labor participation and employment. Retailers have reported that sales are flat but at high levels, and they ex... | 713 |
fomc | 1,999 | President Jordan. | 3 |
fomc | 1,999 | Thank you. To convey the story of our District it is often tempting to say, "It's motor vehicles." If motor vehicles are booming, the economy is booming. And as you all know, motor vehicles are booming. Like Mike Moskow, I was hearing reports from directors, especially those from steel companies, on how they characteri... | 1,354 |
fomc | 1,999 | President McTeer. | 5 |
fomc | 1,999 | Economic growth in the Eleventh District continues to expand at a brisk pace. Employment growth in recent months has been running over 3 percent, well above the national average. The improved condition of our trading partners, especially Mexico, has been an important factor. The purchasing power of the Mexican peso is ... | 698 |
fomc | 1,999 | President Stern. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. The major trends in the District economy remain intact, which is to say that outside of the agricultural sector the District economy is very healthy. Consumer spending is strong; auto sales are particularly strong. My casual observation, for what it's worth, is that one of the things going on i... | 501 |
fomc | 1,999 | President Poole. | 4 |
fomc | 1,999 | Mr. Chairman, as I travel around the Eighth District I try to press people on what's new or what's different. There's usually a silence and then somebody will talk about the pressures in the labor market. Of course, that's not really new. So what I'm hearing is just a broken record. When I press people about the labor ... | 624 |
fomc | 1,999 | Vice Chair. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. The Second District's economy appears to be expanding at a rather steady pace despite intensifying price pressures in the manufacturing and construction sectors. Consumer price inflation apparently remains in check. Private sector employment grew at a 1.7 percent annual rate in August, down fro... | 992 |
fomc | 1,999 | Governor Ferguson. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. As I said at our last meeting, and a number of people have said again at this meeting, we are clearly faced with the issue of whether or not inflation has reached an inflection point. Or to put it another way, we have to decide whether or not aggregate supply and demand are out of balance or be... | 552 |
fomc | 1,999 | Governor Gramlich. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. At the last meeting, I argued that we should do what we're going to do with interest rates and, absent jarring new information, leave them alone until the turn of the year. Markets pretty much expect us to do that and I'm reluctant to dissent from this happy consensus. Nevertheless, while the i... | 1,238 |
fomc | 1,999 | Governor Kelley. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. As we've all been saying, the economy is resurging after its second-quarter slump and the inflation news continues to be highly favorable. It's amazing to me that policy formulation can become more difficult when all the news is good, but it has. Recent news has made our choices still more diff... | 571 |
fomc | 1,999 | Governor Meyer. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. I agree with Governor Kelley that today's decision is especially challenging. The recent data for compensation and core CPI have been remarkably benign. On that basis it would appear to be a reach to argue that there is an urgency to tighten. But the Greenbook tells a different story, one in wh... | 851 |
fomc | 1,999 | I believe coffee is ready. Let's break for coffee. | 11 |
fomc | 1,999 | Mr. Kohn. | 5 |
fomc | 1,999 | Thank you, Mr. Chairman. Committee decisions at this meeting would seem to be complicated not only by continuing uncertainty about the sources of the unusually good economic performance of the United States and how best to sustain it, but also by the possible effects on policy strategy over the near term of the coming ... | 1,927 |
fomc | 1,999 | Questions for Don? President Jordan. | 7 |
fomc | 1,999 | Don, you began your remarks and then referred again later to the point that aggregate demand and aggregate supply, if anything, look better balanced now than before. You cited, if I heard you right, evidence of balance in the data that have been released on labor markets and price markets. If I were doing assessments o... | 187 |
fomc | 1,999 | I think one can differentiate between where we've been and where we're projected to go in that regard. I absolutely agree with your characterization of the forecast. It is not a balanced forecast. Aggregate demand exceeds aggregate supply. There are upward pressures on inflation. And implicitly in the forecast the unem... | 90 |
fomc | 1,999 | I'm not at all convinced that the unemployment rate has to rise, but I am convinced that the trade balance cannot stay where it is, let alone continue to rise. Other people said it better than I did: We need to see this trend reversed. At some point the United States needs to stop being a net absorber of world savings ... | 80 |
fomc | 1,999 | Looking back, one could say that aggregate supply and demand have been in balance, at least in total, as evidenced by what has been happening to prices. But there are elements of imbalance within that total. We've talked about this before, certainly, and one such element is the current account deficit and the trade bal... | 391 |
fomc | 1,999 | Any further questions for Don? If not, let me get started. We have a very difficult set of issues to evaluate. The reason relates largely to what I see as growing evidence that the models with which we have been trying to explain how the American economy functions are becoming increasingly obsolete. It is not that the ... | 4,719 |
fomc | 1,999 | Mr. Chairman, I very much support the "B" part of your recommendation. As for how we handle the verbiage, you and others may remember that I've tried to make the distinction in previous meetings of asymmetry being either strategic or tactical. If we publish some verbiage that describes our assessment of the balance of ... | 319 |
fomc | 1,999 | Governor Meyer. | 3 |
fomc | 1,999 | Mr. Chairman, once again your presentation was a most interesting one. I felt as if I was riding a roller coaster for a while. [Laughter] Sometimes when you start out and begin to talk about accelerating productivity, I feel a bit of discomfort. But I've heard it often enough to know that if I'm patient and just sit ba... | 655 |
fomc | 1,999 | Governor Ferguson. | 3 |
fomc | 1,999 | Thank you. First, let me say that with respect to your overall recommendation, I think you're right on "B" and on some indication of asymmetry. I would join with Governor Meyer in saying--and this goes back to a staff paper that came out earlier--that if in fact productivity isn't picking up, then we clearly want to ti... | 503 |
fomc | 1,999 | Third derivative! [Laughter] President Jordan. | 10 |
fomc | 1,999 | Thank you. Let me start first with this question of symmetry or asymmetry. I think everybody knows my views on that, but I'd just like to remind everyone that there was an action in August following our adoption of a symmetric directive on June 30th. So having a symmetric directive now doesn't preclude an action. My ba... | 753 |
fomc | 1,999 | President Poole. | 4 |
fomc | 1,999 | Mr. Chairman, I support "B" asymmetric. I want to talk about the disclosure issue in a minute, but let me first say that I think "B" is the right place to be. Even though we have all these uncertainties about both productivity growth and labor force participation, there is always the possibility that with very favorabl... | 520 |
fomc | 1,999 | President Boehne. | 5 |
fomc | 1,999 | I agree with the "B" option here. Given the two moves we've taken and balancing the supply side and the demand side uncertainties, I think "B" is right. However, I believe we could undo a lot of the good we're going to do with a "B" decision by fooling around with this asymmetry and symmetry issue at this meeting. Our ... | 310 |
fomc | 1,999 | President Broaddus. | 5 |
fomc | 1,999 | Mr. Chairman, before I came to this meeting I concluded from reading the staff documentation that the Bluebook didn't make a very strong case for tightening but that the Greenbook really did. The Greenbook projection may be wrong but I'm just not prepared to discount it to the extent that I think you have. I believe th... | 559 |
fomc | 1,999 | Governor Gramlich. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. First, my students back at Michigan would be delighted to know that the term "second derivative" has crept into policy discussions. [Laughter] I compliment you on that! On your criticism of models, I'll plead guilty to thinking for a long time in terms of matching aggregate demand with fixed or... | 453 |
fomc | 1,999 | And announcing or publishing it? | 6 |
fomc | 1,999 | And announcing it. | 4 |
fomc | 1,999 | President Moskow. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. I agree with your recommendation of "B" asymmetric. And I certainly agree with your statement that we should be humble about our ability to forecast the future. We've talked about this, and it's a concern that nags us all. I do want to note two points about the forecast that I thought were wort... | 422 |
fomc | 1,999 | President Parry. | 4 |
fomc | 1,999 | Mr. Chairman, before this meeting I favored "B" but concluded that the time for raising rates is probably not that far off. As a result of the discussion today, I think it's even nearer but I still would favor alternative B. With regard to the symmetry issue, I must admit that I found the experience we encountered--in ... | 158 |
fomc | 1,999 | President McTeer. | 5 |
fomc | 1,999 | Mr. Chairman, I truly enjoyed your lecture a moment ago and when you publish it I recommend the title "The Rediscovery of Say's Law." I think it is important for us to give Say's Law at least equal billing with Keynes's Law in these discussions. During the go-around there was a lot of talk about favorable but temporary... | 716 |
fomc | 1,999 | Between words or announcing the decision on asymmetry, which would you choose? I'm trying to get a sense of where everyone is to formulate a proposal for the vote. You seemed to imply that of the three variations, the least desirable is to publish the asymmetry. A second option would be to have asymmetry and not publis... | 82 |
fomc | 1,999 | I'm for the third--to suspend our use and thus announcements of symmetry or asymmetry. I think it's a tie between the first and the second options. I'll go along with whatever you decide to do on that question. But I think we will miss a great opportunity to get rid of that bogeyman if we don't do it now. It would be a... | 108 |
fomc | 1,999 | I'm not sure there's a majority for that position at this stage. | 13 |
fomc | 1,999 | Well, that was before they heard my eloquent argument! [Laughter] | 16 |
fomc | 1,999 | Touche! President Hoenig. | 7 |
fomc | 1,999 | Thank you, Mr. Chairman. I listened to your arguments with great interest, and they are very persuasive. At the same time, my own view is still that we should move the funds rate up 1/4 point now. While I believe productivity is truly increasing, as I said earlier, I think there are other important imbalances in the ec... | 351 |
fomc | 1,999 | President Stern. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. I, too, favor alternative B. Let me take just a few seconds to say why. First of all, as I said earlier this morning, I am relatively optimistic about productivity, and that gives me some confidence going forward. Secondly, that optimism assuages some of my concerns about inflationary pressures... | 273 |
fomc | 1,999 | Governor Kelley. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. As I listened to the go-around, I found myself identifying with those who would have preferred to go ahead and tighten today. But I am comfortable supporting "B" asymmetric, basically for three reasons. First of all, both in the context of what we've talked about here today and also for a numbe... | 396 |
fomc | 1,999 | President Minehan. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. I, too, could have been enthusiastic about increasing the fed funds rate by 25 basis points at this meeting and going with a symmetric directive. That would have conveyed to the markets our concern about the potential for a pickup in inflation--recognizing all the problems associated with forec... | 443 |
fomc | 1,999 | President Guynn. | 4 |
fomc | 1,999 | Mr. Chairman, I identify most closely with the comments Cathy Minehan just made and those of Ed Kelley and Ned Gramlich earlier. In my earlier comments, I indicated that I came into this meeting with the notion that I would be comfortable with another modest tightening move today. Even after discounting our forecast an... | 351 |
fomc | 1,999 | This has been an interesting discussion. I must admit, as I said earlier, that I would have preferred to go asymmetric and put out a press release but not announce our decision with regard to the asymmetry. But I find the arguments in the other direction actually quite convincing. | 55 |
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