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fomc | 2,000 | Thank you, Mr. Chairman. The economic picture remains the same in many respects as it has been for some time: The now record-long expansion has continued to outstrip most analysts' expectations--including our own; meanwhile, inflation--apart from the price of energy--has remained relatively low. Beneath these broad tre... | 1,322 |
fomc | 2,000 | The wide dispersion of economic performance by regions that has characterized global economic activity in varying degrees since 1997 appears to be coming to an end. With the notable exception of the Japanese economy, positive economic developments are now widespread in Asia, Latin America, and Europe. These regions hav... | 982 |
fomc | 2,000 | President Poole. | 4 |
fomc | 2,000 | I have a short question for Karen--or what could be a short question. The discussion in the Greenbook seems to put primary weight on the current account as the underlying factor in the forecast for the dollar. I would think that you would want to put a lot more emphasis on the capital account and conditions affecting i... | 138 |
fomc | 2,000 | That is why in fact we have little tilt either way. There are factors on both sides. Looking forward, in some sense we see the U.S. economy slowing--at least that is the maintained hypothesis in the Greenbook and in so many other forecasts of late--and we see the rest of the world getting stronger and stronger. So on t... | 270 |
fomc | 2,000 | President Parry. | 4 |
fomc | 2,000 | Mike, how would you characterize the degree of monetary restraint in the year 2000 in this forecast versus the January forecast? I ask that because nominal rates are about 1/2 percentage point higher in the latest forecast and inflation rates in overall price indices like the CPI are up by almost the same amount, but t... | 119 |
fomc | 2,000 | Real rates have been more difficult to gauge than usual in this period because of the distortions, if I can put it that way, that have occurred in the fixed-income market. We've seen Treasury yields come down substantially, while movements in others rates have been something of a mixed bag. But in many cases long-term ... | 370 |
fomc | 2,000 | So there isn't a major change. | 7 |
fomc | 2,000 | It's not a major change. I'd say, on balance, that the picture might be a little tighter in terms of the overall fixed-income market assumptions. | 30 |
fomc | 2,000 | Thank you. | 3 |
fomc | 2,000 | President Jordan. | 3 |
fomc | 2,000 | Thank you. I want to ask a question about the alternative simulations. As a general comment, let me say that I like having the alternative simulations. Nevertheless, those that are now included in the Greenbook and all of the other supplementary ones that you have been sending to us are starting to tax my ability to ab... | 236 |
fomc | 2,000 | I'm not sure which numbers you are looking at. The faster productivity growth simulation has substantially higher real GDP growth; it's 0.8 percentage point higher in 2000 and 1.4 percentage points more in 2001. So nominal GDP growth is much more rapid in the high productivity simulation. | 61 |
fomc | 2,000 | In 2000 I agree, but then it slows in 2001. I'm not sure what kind of lags are going on here because your faster productivity growth has GDP growth up 0.1 but inflation down 0.2 in 2001. I thought you were saying that with this lagged effect of an accommodative monetary policy, nominal spending growth accelerates. And ... | 88 |
fomc | 2,000 | Could I interrupt? One of you is looking at the difference between the simulation and the baseline; the other is looking at the year-to-year changes. | 30 |
fomc | 2,000 | Yes, I'm seeing that. I perceive this as a situation where policy is very accommodative. It is taking this favorable shock in significant part through higher output and a downward movement in the unemployment rate. Over time we will find ourselves in the situation where the labor market has gotten tighter. People will ... | 180 |
fomc | 2,000 | Well, I thought it was something like that. That says, though, that the inflationary dynamics that you see are beyond the forecast horizon. | 29 |
fomc | 2,000 | Yes, that is almost always the case in these exercises. | 12 |
fomc | 2,000 | That means that this simulation is of limited usefulness to me if I am going to assume faster productivity growth as I formulate my thinking on policy. By this alone I can't tell what I'm getting myself into. | 40 |
fomc | 2,000 | For us, the basic rule is that in the long run monetary policy is going to determine the inflation rate. If you wanted to achieve the baseline path--while you might have to be fleet of foot here in adjusting policy--presumably you could do it. But you would have to move promptly or else you will get this short-run dyna... | 69 |
fomc | 2,000 | President Hoenig. | 4 |
fomc | 2,000 | Mike, I'd like to explore Jerry's question a bit differently. As I read the Greenbook and the comments you made today, three factors seem to me to be in play. How we weigh those factors in a sense rationalizes whatever policy we pursue. One factor relates to how we judge the position of real interest rates in the conte... | 174 |
fomc | 2,000 | It is a very complex question, and I'll try to be as brief as possible. Let me cite our basic premises. One is that real interest rates and financial conditions in general are not evidently so tight as to be very restraining on the growth of aggregate demand. I think what we have been observing in the performance of th... | 501 |
fomc | 2,000 | President Moskow. | 4 |
fomc | 2,000 | I had a question on the inventory-sales ratios, Mike. As we look back, those ratios have been improving for some time now and I view that as a sort of structural improvement due to improved management techniques, some improved technologies, and better communications. In the Greenbook this time you talked about "B2B" In... | 105 |
fomc | 2,000 | I don't think the B2B Internet connection story has been a very big factor to date. There have been closer connections between firms and their suppliers for a while. It is an ongoing process that has employed various technologies. Our sense is simply that this isn't just talk--that many firms are entering into B2B Inte... | 103 |
fomc | 2,000 | So it's more of the same, a structural change? | 11 |
fomc | 2,000 | It's using a somewhat different technology, one that has more flexibility. It seems to be enveloping an increasing proportion of our business firms. | 27 |
fomc | 2,000 | Further questions for our colleagues? If not, would somebody like to start the Committee discussion? President Parry. | 22 |
fomc | 2,000 | Mr. Chairman, the Twelfth District economy entered the new year with considerable momentum. The pace of job growth in the District has picked up in recent months, further widening the gap in employment growth relative to the nation. The acceleration was most pronounced in California, where payrolls expanded at a 3-1/2 ... | 909 |
fomc | 2,000 | President Jordan. | 3 |
fomc | 2,000 | Thank you. In conversations with directors and advisory council members and others, one remark of a general nature--at least until the recent switch in the stock market with the Dow Jones up and the NASDAQ down--was a very frequent lament about the perverse behavior of the stock market: That companies like Federated an... | 1,897 |
fomc | 2,000 | Mr. Chairman, may I just put in an informational note here? I think the ECI is designed to capture the kind of medical cost phenomenon you described, President Jordan. It's very difficult, I suspect, to get it just right, but it may be one of the reasons why we have not seen an acceleration of medical insurance costs i... | 86 |
fomc | 2,000 | President Broaddus. | 5 |
fomc | 2,000 | Thank you, Mr. Chairman. The overall pace of activity in our District, which was already strong, may actually have accelerated a bit over the last several weeks. And the strength we see is pretty much across the board. Just to summarize quickly, our latest retail survey, which we do monthly along with a manufacturing s... | 1,139 |
fomc | 2,000 | President Boehne. | 5 |
fomc | 2,000 | Thank you, Mr. Chairman. The regional economy in the Philadelphia District continues to operate at high levels, with moderate growth and tight labor markets but with few signs of accelerating inflation. There is a hint of possible slowing in the housing area, but the rest of the regional economy, including retailing an... | 211 |
fomc | 2,000 | President Guynn. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. Growth in the Southeast remains reasonably well balanced and appears to have moderated just slightly from the very strong pace and high level I reported six weeks ago. The modest moderation we sense is most obvious in real estate where not only is residential activity below year-ago levels but ... | 771 |
fomc | 2,000 | President Minehan. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. New England continues its pattern of steady growth, very low unemployment, and a somewhat higher rate of inflation than in the rest of the country, particularly in the areas of medical, housing, and fuel costs. The annual benchmark revisions to employment data contained some good news, at least... | 1,095 |
fomc | 2,000 | President McTeer. | 5 |
fomc | 2,000 | Referring to Cathy Minehan's remarks about CEOs spending a lot more time worrying about the stock market and their stock prices and to Jerry Jordan's conversation with one of his contacts about having excellent performance and falling stock prices at the same time: I recently spoke to a national manufacturers' associat... | 941 |
fomc | 2,000 | President Moskow. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. Since our last meeting, the incoming data for our District have been quite strong. In fact, except for agriculture it is hard to find a weak sector in our District. For example, as has been true for the better part of a year, our housing sector has performed better than the nation's, with both ... | 773 |
fomc | 2,000 | Thank you. Let's take a break for coffee at this stage, but let's keep it relatively short. | 20 |
fomc | 2,000 | President Stern. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. The Ninth District's economy remains healthy. Construction activity is strong as is consumer spending. We have a couple of auto dealers on our two boards of directors and we asked them whether energy prices were affecting auto sales. Their answer was not so far as they could tell; auto sales co... | 372 |
fomc | 2,000 | President Hoenig. | 4 |
fomc | 2,000 | Mr. Chairman, activity in the Tenth District, as in other Districts you have heard from, continues to be very strong and is little changed from last time. On balance, there has been less of an impact than we might have expected from the higher interest rates and from the higher fuel costs. Labor markets remain quite ti... | 631 |
fomc | 2,000 | Governor Gramlich. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. For the past few meetings I have run through an inflation targeting exercise to see what that would show. Today I will give just a quick summary. The model approach from the Greenbook clearly indicates that a tightening of policy is necessary to stabilize inflation at present levels. The pipeli... | 1,160 |
fomc | 2,000 | President Poole. | 4 |
fomc | 2,000 | I'm going to make some scattershot comments here to convey particular points. In the Eighth District we have a clear sense of slowing employment growth, but it seems to be the result of labor supply constraints. The largest states in the District by population--Illinois, Indiana, and Missouri which, of course, are shar... | 1,127 |
fomc | 2,000 | Governor Ferguson. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. I think the question before us today, as others have suggested, is whether the data and the forecasts are strong enough to catalyze an unexpected reaction from this Committee. I postulate that they are not. I believe we should stay on the same moderate course that has become a part of our strat... | 781 |
fomc | 2,000 | Governor Meyer. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. In my judgment little has changed in the outlook and hence the appropriate course for monetary policy since we last met. Let me emphasize the three features of the outlook that, in my judgment, support an increase in the federal funds rate target today and suggest that further increases will be... | 542 |
fomc | 2,000 | Governor Kelley. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. While the data are moving around a bit, as they always do, it seems to me that the situation facing the Committee today has changed very little since our last meeting. As has been the case for some time, as we all know, we see extremely strong demand driving the economy toward overheating on th... | 132 |
fomc | 2,000 | Vice Chair. | 3 |
fomc | 2,000 | Mr. Chairman, the Second District's economy continues to expand at a rapid pace and rising costs of energy and other inputs have yet to show up in core finished goods inflation. Employment has risen at a brisk pace in early 2000, despite persistent job losses in manufacturing. And what had appeared to be a difficult em... | 699 |
fomc | 2,000 | Okay. I call now on Don Kohn. | 10 |
fomc | 2,000 | Thank you, Mr. Chairman. The information becoming available since your last meeting has once again indicated somewhat stronger growth of both aggregate demand and potential aggregate supply than had been anticipated. The behavior of the unemployment rate--essentially flat for five months now--does not suggest that unde... | 2,024 |
fomc | 2,000 | Questions for Don? If not, I will proceed. Let me say at the outset that I think the balance of risks clearly indicates that we are on the right policy path. Accordingly, I think we should be moving another 25 basis points today, retain the sentence in our press release expressing the view that the balance of risks rem... | 1,962 |
fomc | 2,000 | Are we starting the go-around? | 7 |
fomc | 2,000 | Yes. | 2 |
fomc | 2,000 | A while ago leaning against the wind was mentioned. I noted earlier that we recently had a meeting of our Advisory Council on Small Business and Agriculture, and I learned at that meeting that on the plains of the Texas Panhandle a fairly constant and fairly strong wind prevails most of the time. All of the chickens ha... | 156 |
fomc | 2,000 | Vice Chair. | 3 |
fomc | 2,000 | I agree with your recommendation and the reasoning behind it, Mr. Chairman. | 15 |
fomc | 2,000 | President Poole. | 4 |
fomc | 2,000 | Mr. Chairman, I support the recommendation. I think we need to leave the view in the marketplace that this is the strategy--that we will have 25 basis point increases until the data convince us that a further increase is no longer necessary. I want to reinforce something that Don Kohn said about the importance of the m... | 544 |
fomc | 2,000 | President Boehne. | 5 |
fomc | 2,000 | I agree with your recommendation, Mr. Chairman, for the reasons you've outlined. | 16 |
fomc | 2,000 | President Jordan. | 3 |
fomc | 2,000 | I agree with the recommendation. | 6 |
fomc | 2,000 | President Guynn. | 4 |
fomc | 2,000 | I support your recommendation, Mr. Chairman, but I would also like to see a 1/4 point increase in the discount rate as a way to reinforce the message that we are trying to send. Thank you. | 44 |
fomc | 2,000 | President Hoenig. | 4 |
fomc | 2,000 | I agree with your recommendation, Mr. Chairman. I do want to make a comment. When you say "strategy," given the level of uncertainty that we've talked about here, I want to clarify that our strategy is not necessarily that we are on a course to continually increase the funds rate. I favor a strategy that says we know t... | 134 |
fomc | 2,000 | I think we are saying that the balance of risks is on the up side. | 16 |
fomc | 2,000 | Right. | 2 |
fomc | 2,000 | That is a probabilistic statement. And assuming everybody agrees that the balance of risks is on the up side, I suspect that we have a very wide distribution of what people think that probability is. | 39 |
fomc | 2,000 | Right. With this move we will have moved 125 basis points since last June and 50 basis points from where we were at the start of the year. It may be appropriate to move again in the future, but by saying the balance of risks is on the up side, I also want to be clear that it is not a sure thing. Our strategy isn't to m... | 87 |
fomc | 2,000 | No, I think that's right. The way I put it last month was that that would be the implied strategy if indeed we continued to see the types of imbalances that we were seeing. But should that change--and indeed, we hope and expect it to change--that will obviously affect our decisions over the longer run. Or if the inflat... | 88 |
fomc | 2,000 | Thank you. | 3 |
fomc | 2,000 | But I don't see how any of us can forecast that at this particular point. | 16 |
fomc | 2,000 | I agree. | 3 |
fomc | 2,000 | President Minehan. | 4 |
fomc | 2,000 | I agree with your policy recommendation, Mr. Chairman. I certainly agree with the asymmetry. I probably could have gone with 50 basis points, too. I don't find a move of 50 basis points all that scary and I think it might not be a bad idea sooner rather than later to do something that expresses more concern about the i... | 287 |
fomc | 2,000 | President Moskow. | 4 |
fomc | 2,000 | Mr. Chairman, I agree with your recommendation. I, too, am where I was at the last meeting. I believe the gradual approach is a very wise way for this Committee to proceed. On the interpretation of the balance of risks, I just want to add one little footnote. In our discussion of this approach when we adopted it, we ma... | 135 |
fomc | 2,000 | President Parry. | 4 |
fomc | 2,000 | Mr. Chairman, I support your recommendation with regard to the funds rate. I also think it is important to reinforce to the public that we are focusing on the heightened inflation risks for the future. | 39 |
fomc | 2,000 | Governor Gramlich. | 4 |
fomc | 2,000 | I support the recommendations. I'll admit to Bill and others that I have had private mental dalliances with 50 basis points, but I'll get over it. [Laughter] On the other hand, I have to say to Don that he was so convincing about the case for moving 50 basis points today that I actually thought for a moment that he mig... | 80 |
fomc | 2,000 | President Stern. | 3 |
fomc | 2,000 | I support your recommendation, Mr. Chairman, because virtually any reasonable framework that I can think of implies that in current circumstances real interest rates should go up. | 31 |
fomc | 2,000 | President Broaddus. | 5 |
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