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fomc | 1,999 | Larry, could you clarify your position? Are you saying that this paragraph should have stronger language? | 19 |
fomc | 1,999 | I read this change as almost an encouragement of more frequent intermeeting adjustments. I would prefer it to say that the Committee appreciates that in rare cases the Chairman has the authority to act on the Committee's behalf. | 42 |
fomc | 1,999 | All right. | 3 |
fomc | 1,999 | Let me say a couple of things. First, there is no intention to change our standard procedure. And when it comes time to adopt something like this language, I think the minutes should reflect that this is not intended to expand or contract the authority the Chairman normally has. Secondly, Virgil and others can look at ... | 428 |
fomc | 1,999 | We got a lot more done on this than I expected. There are no other items on the agenda except to confirm the date of the next meeting, which is Tuesday, the 21st of December. | 41 |
fomc | 1,999 | Good morning, everyone. Would somebody like to move approval of the minutes for the November 16th meeting? | 22 |
fomc | 1,999 | Move approval. | 3 |
fomc | 1,999 | Without objection. Peter Fisher, you wanted to discuss the report of examination, I understand? | 18 |
fomc | 1,999 | Yes. I wanted to elaborate a little on Louise Roseman's memo to Don Kohn about the unresolved difference between the internal accounting records of the Markets Group Accounting and Control Unit and those reflected in the Integrated Accounting System regarding the System's net interest accruals on foreign currency inves... | 898 |
fomc | 1,999 | Is there any evidence of a surprising rise in standards of living of key people involved? | 17 |
fomc | 1,999 | No, there is not. | 6 |
fomc | 1,999 | Has somebody looked? | 4 |
fomc | 1,999 | Yes, we have looked into that. Many of the staff people are still at the Bank, though others are not. But we have found nothing of that nature. | 33 |
fomc | 1,999 | Were it an embezzlement, prior to what period would it have occurred? | 17 |
fomc | 1,999 | We only know that the difference existed prior to December 1994. | 14 |
fomc | 1,999 | It could have been any time prior to that? Is there a beginning point, other than 1914? | 22 |
fomc | 1,999 | The details certainly don't exist for pre-December1994 records, so I don't know how we could determine the beginning point--in 1973 or 1963 or where. Prior to 1994, the only interest income we were receiving in that account was coming from the BIS, the Bundesbank, and the Bank of Japan. So the source of the income was ... | 151 |
fomc | 1,999 | Other questions on this issue? Let us go forward to your regular report. | 15 |
fomc | 1,999 | Turning to the packet of colored charts,1/ page 1 depicts the rates implied by forward rate agreements. As you can see in the top panel, in the period since your last meeting forward rates rose steadily until the release of the employment report on December 3rd when the market reacted to a lower-than-expected average h... | 1,939 |
fomc | 1,999 | Questions for Peter? | 4 |
fomc | 1,999 | I have one little question. | 6 |
fomc | 1,999 | I'm sorry. We have not yet approved the Examination Report of the System Open Market Account. That requires a motion. | 23 |
fomc | 1,999 | I move that we approve the SOMA Examination Report. | 11 |
fomc | 1,999 | Without objection. President Minehan. | 7 |
fomc | 1,999 | You mentioned a couple of times, Peter, that you think anxieties about Y2K have shifted from the actual turn-of-the-year period of 12/31/99 to 1/1/00 to the first couple of weeks in January. Is there anything more substantial to it than that? Are there particular concerns in the market? I know there is a lot of concern... | 130 |
fomc | 1,999 | It may just be a relative issue in that anxieties about the last few days of the year, when people thought markets would be most illiquid, have gone away. So relatively speaking, the state of anxiety, whatever it may be, is now about the first ten days of January. | 58 |
fomc | 1,999 | It just got pushed out? | 6 |
fomc | 1,999 | Yes, it was just shifted out into the new year. There are certainly a number of people who are more worried about the state of settlements and heavy volume after an accumulation of slow days. If the whole system gets as sticky as molasses, the problem is not going to be on January 3rd and 4th; it is going to be on the ... | 234 |
fomc | 1,999 | Thank you. | 3 |
fomc | 1,999 | I move approval of the domestic operations. | 8 |
fomc | 1,999 | Without objection they are approved. Mike Prell and Karen Johnson. | 13 |
fomc | 1,999 | Thank you, Mr. Chairman. If I were to put the Greenbook in a seasonal nutshell, I suppose I would say that we've brought you tidings of great joy, but maybe not great comfort. In broad macro terms, the economy has been performing splendidly. Though we can't be especially confident at this point, it looks as if real GDP... | 1,530 |
fomc | 1,999 | In my remarks I will first say a few words about the October trade data that were released after the Greenbook was completed and then will review what we perceive to be some of the risks confronting the global economy. In October, the U.S. nominal trade deficit in goods and services reached $25.9 billion, a new monthly... | 772 |
fomc | 1,999 | Questions for either of our colleagues? President Moskow. | 11 |
fomc | 1,999 | Thank you, Mr. Chairman. I want to ask Mike a question about the outlook for automobile sales next year. The Greenbook projection for sales of light vehicles is 16.6 million, and I am sure you know that the auto companies are estimating around 15.9 million. We had a symposium at our Bank a few weeks ago with a group of... | 130 |
fomc | 1,999 | Well, no one has had a particularly good track record on forecasting auto sales this year. Even the automobile manufacturers themselves, I think, have been quite surprised by the high level of sales. Our forecast of overall economic activity is, as I suggested, in the upper brackets of forecasts that one would find at ... | 177 |
fomc | 1,999 | Mike, I thought the section in the Greenbook on alternative simulations was particularly interesting, especially the comparison between the baseline and the flat funds rate scenario. It seems to me, if one compares the effects of monetary policy actions on inflation expectations in the economy, that there is a greater ... | 178 |
fomc | 1,999 | I'm not sure that I can provide a very good direct answer to the question of sensitivity to policy actions. We have looked to see whether the responses--in terms of long-term rate movements and so on--to changes in the funds rate are different now. I think there may be some small amount of evidence supporting that thes... | 65 |
fomc | 1,999 | The most important change in the model, relative to where it was a few years ago, is the reaction of the economy and the agents in the economy when we don't tighten in a period when the economy is strong. In that case, people think we have revised up our inflation target, whereas in the past our model basically assumed... | 213 |
fomc | 1,999 | I should say that one of the nice features of our model is the ability to change the expectations formation mechanisms. And the one that we have used in doing these simulations is a very simple, small model that is supposed to capture the way people will react to a certain set of variables. It isn't a fully consistent ... | 231 |
fomc | 1,999 | One other area where over time there has been some structural change in the economy that has tended to increase the sensitivity of output to interest rates has been through the increasing openness of the economy and the exchange rate mechanism. | 42 |
fomc | 1,999 | Thank you. | 3 |
fomc | 1,999 | President Broaddus. | 5 |
fomc | 1,999 | Mike, on the top of page 7 of the first part of the Greenbook, you say that you are expecting hours in the nonfarm sector to increase at a 21/4 percent rate this quarter. And you say that if we get nonfarm productivity increasing at a 31/4 percent rate we will get the 4.8 percent GDP forecast. That doesn't seem to add ... | 90 |
fomc | 1,999 | We have a government sector to account for and I think that is probably the-- | 16 |
fomc | 1,999 | The government and household sectors overwhelm it. Agricultural productivity is still accelerating according to the data that we have. | 21 |
fomc | 1,999 | Yes, that's why I couldn't figure out- | 9 |
fomc | 1,999 | Although agricultural productivity might slump if genetically modified organisms were made illegal. | 13 |
fomc | 1,999 | On wages, is there any way to sort out the forward-looking expectations effects from the backward-looking effects of recent changes in the CPI, which I think you were using as a part of your outlook for wages? | 42 |
fomc | 1,999 | I don't think there is a particularly good way. And I'm not sure, in fact, whether in the real world we don't have a mixture of both occurring. In a mechanical way we have cost of living adjustments in various contracts, so that is clearly backward-looking. I would think that in many informal wage adjustment systems pe... | 154 |
fomc | 1,999 | If you enter both the Michigan Survey's forward-looking expectations and lagged prices into a wage equation, typically both will have some explanatory power. Whether you really and truly have identified those two separate effects, given their co-linearities, would be a tough call. | 52 |
fomc | 1,999 | As you know, we are getting some preliminary evidence that the wealth effect may be larger than the 3 or 4 percent stemming from capital gains that basic distributed lagged econometric analysis produces. As a general proposition is it true that because of the random noise in the system any very significant reduced form... | 250 |
fomc | 1,999 | We have looked at how robust those estimates are, examining different estimation periods and so on, and one would find some variation in that respect. On a priori grounds, one might think that this effect would not necessarily be perfectly stable over time as the demographic distribution of wealth changes. If more of t... | 143 |
fomc | 1,999 | I'm not even raising the issue of stability. I am raising strictly the question of the size. It is perfectly possible to have all the things you are mentioning but for the bias to be there as a function of the data themselves. I'm just questioning whether or not--other than by disaggregating the data--we have any indic... | 167 |
fomc | 1,999 | There is one piece of evidence, though, suggesting that our estimated wealth effect is not too far off base. And that is that the decline in the saving rate we have seen has been roughly consistent with what the consumption equation uses--that is, what a 3 to 4 cents on the dollar wealth effect would suggest should be ... | 376 |
fomc | 1,999 | Have you tried at all to capture potential stock price volatility as a factor that would delay the sense of persistence of the gains? Or is the period just too short to provide any useful insight? | 38 |
fomc | 1,999 | I've asked our consumption experts that question. They claim that there has not been much success thus far in their effort to work the volatility in stock prices into those consumption functions. It may be a function of the fact that, when we are using the aggregate time series data, we are asking far too much from tho... | 87 |
fomc | 1,999 | Thank you. Any further questions? If not, who would like to start the roundtable discussion? President Parry. | 24 |
fomc | 1,999 | Mr. Chairman, economic activity in the Twelfth District has continued to expand rapidly in recent months, with the expansion broadly based across major District states. Every major sector in the District added jobs in recent months, with construction posting some of the largest gains. And manufacturing has been a new s... | 845 |
fomc | 1,999 | Incidentally, parenthetically, President Parry has suggested a disaggregation of the wealth effect by regions. [Laughter] President Hoenig. | 29 |
fomc | 1,999 | Thank you, Mr. Chairman. The underlying trends in the Tenth District economy have not materially changed since our last meeting. The economy remains healthy, with manufacturing actually showing some continued rebound. I am hearing more comments throughout the District that higher interest rates have slowed some constru... | 653 |
fomc | 1,999 | President Jordan. | 3 |
fomc | 1,999 | Thank you. In recent reports from directors, the focus has been as much on the outlook for the next year as it has on current or recent conditions, especially among those people who indicated they were in their profit-planning cycles or putting together business plans. We questioned them about the specifics they were p... | 1,096 |
fomc | 1,999 | President Broaddus. | 5 |
fomc | 1,999 | Mr. Chairman, I would like to say a few words about the directive when we get to that later in the meeting, so I'll try to compensate by being especially brief here. In any event, I don't have any great insights on the economic outlook. In short, I don't detect a lot of change in conditions either in our District or in... | 522 |
fomc | 1,999 | I think you've stopped this meeting cold! That's a new statistic, which we had better absorb! President Guynn. | 23 |
fomc | 1,999 | Mr. Chairman, I'm not sure I want to follow that! And I would also like to reserve a little time for the later discussion, but I won't trade away all of my time. The beat goes on. Growth in our region remains strong and relatively balanced, and our contacts across almost all of our geographic areas and industries are e... | 821 |
fomc | 1,999 | President Boehne. | 5 |
fomc | 1,999 | Thank you, Mr. Chairman. The regional economy in the Philadelphia District continues to operate at high levels, with a general sense that the good times will roll on. Retail sales are robust throughout the District. Some high-end car dealers are having trouble getting deliveries, not because the manufacturers can't pro... | 313 |
fomc | 1,999 | President Minehan. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. New England continues its recent pattern of moderate growth, at least as measured by the increase in employment levels, which have been a full percentage point below the nation for some time. For most of the region, however, labor force growth has also been slower. And it has been slower than t... | 1,342 |
fomc | 1,999 | President McTeer. | 5 |
fomc | 1,999 | Economic growth in the Eleventh District has accelerated slightly over the last couple of months. Thanks to higher oil and natural gas prices, the energy sector has picked up somewhat, with the result that overall economic activity and optimism in Houston and the Gulf Coast area more generally have improved significant... | 458 |
fomc | 1,999 | President Moskow. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. The Seventh District economy continues to be strong. Many of our retailers indicate that sales have been ahead of expectations since Thanksgiving. There are always some retailers who are nervous and, as one major retailer noted late last week, the play is at the plate. The light vehicles market... | 1,024 |
fomc | 1,999 | President Stern. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. The District economy remains in good shape and I will only comment on a few things that have changed relative to previous discussions. Agriculture, it turns out, has had a somewhat better year than many had feared. A lot of that is due to government payments. But in addition crops turned out to... | 549 |
fomc | 1,999 | Vice Chair. | 3 |
fomc | 1,999 | Mr. Chairman, the Second District's economy continues to grow at a moderate pace. Despite continued widespread evidence of price increases for manufacturing inputs and housing, overall inflation remains subdued at the consumer level. You have all no doubt heard of the drama of the possible New York City transit strike.... | 617 |
fomc | 1,999 | Governor Gramlich. | 4 |
fomc | 1,999 | Thank you, Mr. Chairman. Let me use my time to make some longer-term suggestions about how we should be operating, elaborating on some comments that I made earlier. Herb Stein once said something that comes close to capturing the essence of economics: "Things that can't go on, won't." What economists are good at, if an... | 464 |
fomc | 1,999 | So, it's only 20! | 7 |
fomc | 1,999 | That's right. Perhaps it's only 20. The adoption of inflation targeting is not as widespread as I said earlier, but it's still widespread. And it has worked well where it has been tried, as documented by a number of research papers. Perhaps more telling, no country that I know of has tried inflation targeting and then ... | 579 |
fomc | 1,999 | President Poole. | 4 |
fomc | 1,999 | Mr. Chairman, the comment that I hear around the Eighth District is that there is absolutely nothing new. That can't be quite absolute, but it is very close. After all, we met only five weeks ago and not all that much happens ordinarily in five weeks. In summary, our labor market continues to be tight but not impossibl... | 302 |
fomc | 1,999 | A true sailor! | 4 |
fomc | 1,999 | Governor Ferguson. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. I think we are entering a period, as others have said, that is going to be somewhat challenging for us. In the short run, we clearly do not want to destabilize markets as we go into the Y2K period. One always hates to see a marathon runner trip up at the end, and we certainly don't want to be t... | 618 |
fomc | 1,999 | Governor Kelley. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. I raised my hand this morning mainly to be recorded as present and participating in this section of the meeting. [Laughter] That's because little seems to have changed in recent weeks. The economy apparently continues to have a strong head of steam, the inflation news continues favorable, and p... | 199 |
fomc | 1,999 | Governor Meyer. | 3 |
fomc | 1,999 | Thank you, Mr. Chairman. There is clearly strong momentum in private domestic demand and at the same time few signs of rising core inflation. So far so good. The issue is sustainability. The Greenbook weighs in with an assessment that the current state is not sustainable--not at the current monetary policy setting or e... | 330 |
fomc | 1,999 | Thank you very much. Is coffee available? | 9 |
fomc | 1,999 | Yes. | 2 |
fomc | 1,999 | Coffee is served. | 4 |
fomc | 1,999 | Let's turn now to Don Kohn for his report. | 11 |
fomc | 1,999 | The discussion in the Bluebook assumed that you would rule out a tightening at this meeting. While you might be troubled about the inflation outlook, a firming would come as a complete surprise to market participants. In the unusually illiquid conditions leading up to the century date change, such a surprise could have... | 1,645 |
fomc | 1,999 | Questions for Don? | 4 |
fomc | 1,999 | Don, just listening to you tells me how difficult it will be to craft any kind of asymmetric announcement today. Wouldn't it seem practical to have this be one of those announcements where we say as little as possible--something along the lines of we met, we didn't do anything, and we'll see you next year? | 63 |
fomc | 1,999 | That's an option we talked about a bit in the Bluebook. The issue in my mind was whether the Committee was really intent on keeping the current degree of tightening in the markets. There would be a risk if you did what you propose, it seems to me, though it very well might work: The markets might say the FOMC is symmet... | 261 |
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