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fomc | 2,000 | Thank you. | 3 |
fomc | 2,000 | Governor Gramlich. | 4 |
fomc | 2,000 | I actually wanted to get in on the previous discussion between Jerry Jordan and Don Kohn. As I interpret Jerry's argument, it is that we could get a productivity shock and, perhaps because of the wealth effect, wages will not catch up. Frankly, I would like to believe that. I think we would all like to believe that. Bu... | 184 |
fomc | 2,000 | Further questions for Don? | 5 |
fomc | 2,000 | May I respond on that? | 6 |
fomc | 2,000 | Please. | 2 |
fomc | 2,000 | That is not clear to me if part of the manifestation of the wealth effect on the part of the work force is in their rights to future consumption that is contained in their pension plans, their 401(k) profits, or whatever. | 47 |
fomc | 2,000 | If they have savings. | 5 |
fomc | 2,000 | Their claims on future streams of consumption rise and that does not necessarily have to pass through a paycheck. | 20 |
fomc | 2,000 | Anything else? If not, let me begin. I think the evidence that the expansion is slowing to a certain extent is pretty much unambiguous. Usually, a useful clue to watch is the relationship between short-term forecasts of statistics that get published against the actual outcome to see whether the outcomes are higher or l... | 2,075 |
fomc | 2,000 | Mr. Chairman, I support your recommendation. | 9 |
fomc | 2,000 | President Poole. | 4 |
fomc | 2,000 | Mr. Chairman, I support your recommendation. The futures market has built in another 1/4 point at our August meeting. I believe that is a reasonable bet at this time, but I think the data over the coming weeks will decide that issue and the market will move rates in the appropriate direction. | 61 |
fomc | 2,000 | Governor Ferguson. | 3 |
fomc | 2,000 | Mr. Chairman, I support your recommendation. I think we have done a great deal of work thus far and it is not unreasonable to take a pause, given the degree of uncertainty and the other factors to which you have alluded. | 47 |
fomc | 2,000 | Governor Gramlich. | 4 |
fomc | 2,000 | Mr. Chairman, I support your recommendation. | 9 |
fomc | 2,000 | Governor Kelley. | 3 |
fomc | 2,000 | Mr. Chairman, I support the recommendation. But I would like to add that I hope the statement we release to the public will be quite strongly worded. I think this recommended action is exactly what the market consensus expects and I would hate to see an overly euphoric reaction to it, which I believe is quite possible.... | 99 |
fomc | 2,000 | We can do that in one of two ways--either in a statement, which presumably would be merely a reiteration of our previous remarks, or in the Humphrey-Hawkins testimony, where we can surely fine-tune it. | 47 |
fomc | 2,000 | However, I would like to see a statement today that is a little stronger than the words we have used in the past. | 25 |
fomc | 2,000 | I'm not sure I would agree with that for lots of reasons, but let's hold that and see what the rest of the Committee members say. | 28 |
fomc | 2,000 | Fine. I just want to put it on the table. | 12 |
fomc | 2,000 | Okay. President Parry. | 6 |
fomc | 2,000 | Mr. Chairman, I support your recommendation. | 9 |
fomc | 2,000 | President Moskow. | 4 |
fomc | 2,000 | Mr. Chairman, I support your recommendation. | 9 |
fomc | 2,000 | President Stern. | 3 |
fomc | 2,000 | I don't see any reason to deviate from the pattern! [Laughter] I support the recommendation. | 21 |
fomc | 2,000 | Governor Meyer. | 3 |
fomc | 2,000 | Mr. Chairman, I support your recommendation, too. I should note that this was the position I felt comfortable with as I went home for the weekend. And when the Bluebook came and I opened it, I found that it was sort of arguing with me and questioning whether I should feel comfortable with that decision, given my views.... | 487 |
fomc | 2,000 | President Minehan. | 4 |
fomc | 2,000 | I agree with your recommendation, Mr. Chairman, particularly the part that keeps the Committee on record both in the press statement and in the Humphrey-Hawkins testimony that the risks are still on the up side. I agree with Governor Kelley's point on this, although I would be a little concerned about changing the word... | 329 |
fomc | 2,000 | President Broaddus. | 5 |
fomc | 2,000 | Mr. Chairman, if I could take a bit of time here, I would like to look more closely at the Bluebook's baseline forecast. I found it very helpful in trying to think through the longer-run implications of what we do today. I think it's important that we do that. The baseline is not the only scenario, but it is a plausibl... | 1,211 |
fomc | 2,000 | President Hoenig. | 4 |
fomc | 2,000 | Mr. Chairman, I support your proposal. I don't know if we have moved as far as we need to, but I suspect that right now there are still a lot of monetary policy effects in the pipeline from the actions we have taken here recently that are not yet fully in play. We ought to let them work and observe where that is taking... | 171 |
fomc | 2,000 | President Guynn. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. Let me just note very briefly--I should have added this yesterday, perhaps--that in our discussion of different models and various ways of looking at how the economy is working at this time, I would have joined those yesterday who expressed some uneasiness about the NAIRU construct. Like our co... | 305 |
fomc | 2,000 | First Vice President Stone. | 5 |
fomc | 2,000 | Mr. Chairman, I support your recommendation. Particularly in light of the action taken at the last meeting and also because the forecast of long-run expected inflation has remained stable, I think we have time to take a look at whether the economy is truly slowing at this point. Thank you. | 57 |
fomc | 2,000 | President Jordan. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. For this meeting I support the recommendation for no action. And in line with the Vice Chairman's remarks yesterday, if a recommendation to raise the federal funds rate--whether at this meeting or a subsequent meeting--had an underlying objective of raising the unemployment rate or opening up a... | 356 |
fomc | 2,000 | President McTeer. | 5 |
fomc | 2,000 | I agree with your recommendation. | 6 |
fomc | 2,000 | Would the Secretary read the appropriate language? | 8 |
fomc | 2,000 | The language comes from page 19 in the Bluebook: "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee in the immediate future seeks conditions in reserve markets consistent ... | 130 |
fomc | 2,000 | Call the roll. | 4 |
fomc | 2,000 | Chairman Greenspan Yes Vice Chairman McDonough Yes President Broaddus Yes Governor Ferguson Yes Governor Gramlich Yes President Guynn Yes President Jordan Yes Governor Kelley Yes Governor Meyer Yes President Parry Yes | 40 |
fomc | 2,000 | Don, would you read the proposed statement? | 9 |
fomc | 2,000 | I think Lynn Fox has the statement. | 8 |
fomc | 2,000 | Do you want to circulate it? | 7 |
fomc | 2,000 | Yes, we're going to circulate it. Why don't we just let people read it. | 17 |
fomc | 2,000 | [Pause] Any comments? | 6 |
fomc | 2,000 | Mr. Chairman, it would seem to me logical to take the third paragraph, which refers to the signs of slowing as being tentative, and put that right after the first sentence of the second paragraph, which refers to real activity, and move the comment about core inflation down. | 55 |
fomc | 2,000 | What is the view of the Committee on this? | 10 |
fomc | 2,000 | I like it the way it is. | 8 |
fomc | 2,000 | Is there any support for President Poole's recommendation? Is this draft generally acceptable as it stands? SEVERAL. Yes. | 26 |
fomc | 2,000 | Thank you very much. It is a little early to go to lunch! | 15 |
fomc | 2,000 | Coffee is out there. Lunch will be served at noon. [Laughter] | 16 |
fomc | 2,000 | At the outset I want to welcome Tony Santomero from Philadelphia to his first meeting. I assume that you have been given the various paraphernalia you will need, including a Fedspeak dictionary? [Laughter] Our first presentation is usually indecipherable even with the dictionary! I call on Peter Fisher. [Laughter] | 68 |
fomc | 2,000 | All right. Thank you, Mr. Chairman. [Laughter] | 14 |
fomc | 2,000 | That was meant as a compliment! | 7 |
fomc | 2,000 | At least I'm worthy of note. I'll be referring to the usual package of indecipherable charts, which have been relabeled specially, in accordance with your wishes, Mr. Chairman.1 | 38 |
fomc | 2,000 | Thank you very much. | 5 |
fomc | 2,000 | The top panel on the first page depicts forward and current deposit rates. Since your last meeting, both the current and the 3-month forward deposit rates have declined. And the current 3-month LIBOR rate is about 10 basis points lower than at the time of your last meeting. Moreover, the 3-month, 6-month, and 9-month f... | 2,317 |
fomc | 2,000 | There will be no market if everyone is willing to accept the market price but nobody has a transaction. | 20 |
fomc | 2,000 | That's right, Mr. Chairman. So the market is waking up to this situation. It isn't really an issue of the 10-year fiscal forecast. It is a matter of the maturity schedule over the next two years. There is likely to be a noticeable decline in issuance about a year from now, as the amount the Treasury has to roll over de... | 245 |
fomc | 2,000 | I think the Treasury's debt to the public is down to $3.4 trillion minus our holdings of $1/2 trillion or so. And a very large chunk of the remainder is held by official parties abroad. Do we have any very recent evidence on whether they are paring their holdings as the Treasury liquidates its debt or are contemplating... | 195 |
fomc | 2,000 | Yes, in discussions with my central bank counterparts in other countries it is clear that a great deal is going on in that area. Let me try to distinguish a couple of classes of central banks. There are some central banks that have rather sophisticated foreign currency reserve management programs. I mean that in a comp... | 609 |
fomc | 2,000 | Is there any chance that they would really stonewall and just continue to do what they are doing? | 20 |
fomc | 2,000 | Yes, there is always some chance of that. But I believe has very good relations with and we're hopeful that the officials from both countries will be able to talk this through. I think the more junior people in understand the complexity of this, and on that side of the house I'm quite confident that there is no animosi... | 165 |
fomc | 2,000 | It is. It's sad in a sense. | 9 |
fomc | 2,000 | Peter, with respect to diversification of these holdings overseas, have you seen foreign governments or foreign central banks moving more aggressively into GSEs or have they been moving out of GSEs? I know some of them do hold GSEs. Do you know how they have been dealing with those holdings? | 61 |
fomc | 2,000 | Yes, there may have been something of a rotation there--we have custody of their holdings of GSEs--but it's been pretty stable. It has not really been changing much in total. Some may have been driven to them and others were dissuaded from thinking of holding them as the single answer to the problem by some of the stat... | 175 |
fomc | 2,000 | President Poole. | 4 |
fomc | 2,000 | I don't understand why the U.S. Treasury should be unhappy if the are willing to hold U.S. Treasuries at 2 percent or some unusually low yield. It would seem to me that if the market understands why this has come about, it won't cause any trouble. It would just benefit the U.S. taxpayers. | 66 |
fomc | 2,000 | Obviously, it's not the level of the yield, which would be a saving for U.S. taxpayers. It's the lumpiness of the In one five-year auction they might take down 35 percent of the offering and in the next one they wouldn't participate. And we don't really have any way for the market to get a transparent sense of what the... | 139 |
fomc | 2,000 | And yields. | 3 |
fomc | 2,000 | And, therefore, market yields. | 7 |
fomc | 2,000 | Which in turn is likely to have a negative effect on the propensity of foreigners' willingness to hold U.S. Treasuries. | 26 |
fomc | 2,000 | Yes, absolutely. The feedback effect of making the market more volatile, more quickly is a concern. | 20 |
fomc | 2,000 | President Broaddus. | 5 |
fomc | 2,000 | Peter, with respect to the foreign exchange proposal in your memo, is this going to be announced publicly or to the markets in some way? | 28 |
fomc | 2,000 | Yes, in due course. It would need to come out in the quarterly report on our foreign exchange activities that we produce jointly with the Treasury. The announcement effect is something that I think the Treasury in particular needs to be sensitive to in terms of our relations with other ministries of finance as issuers ... | 120 |
fomc | 2,000 | I think it's fine to do this, as we discussed earlier, as a housekeeping item. But it occurs to me, given the condition of the euro, that this could be seen by at least some people in the markets as a signal that we may be more inclined and more willing to intervene in foreign exchange markets than we have been in rece... | 96 |
fomc | 2,000 | Yes, we certainly don't want people to think that how we invest our reserves has anything to do with our intervention appetite. And we will try to make sure that, however announced, it is communicated as "good housekeeping" in our investments. | 48 |
fomc | 2,000 | I had to get that on the record! | 9 |
fomc | 2,000 | Vice Chair. | 3 |
fomc | 2,000 | Mr. Chairman, I have more of a comment than a question. It seems to me that a country that has a current account deficit of more than 4 percent of GDP has to be very concerned about anything that would affect foreign views about investing in that country, as your comment a moment ago suggests. I think the likelihood of... | 243 |
fomc | 2,000 | Let me just add to that point, in light of President Poole's comment. The Treasury is motivated here by the cash management nuisance. They just don't want to end up with more cash than they need, which is a result the foreign add-on procedure has produced several times in the last six months. That's also a nightmare fo... | 253 |
fomc | 2,000 | Further questions on this subject? | 6 |
fomc | 2,000 | Does this include the topic of the euro diversification? | 10 |
fomc | 2,000 | No, we haven't gotten there yet. But if there are no further questions, we can now turn to that subject. As you know and as Peter mentioned, he has circulated a memorandum on the issue of diversifying foreign reserves out of German euro-denominated instruments into other euro-denominated instruments. I assume that this... | 92 |
fomc | 2,000 | Yes, first a question, though you may want to treat it as rhetorical when I get to it. What is the current dollar equivalent value, roughly, of both the Fed and Treasury holdings of yen and euro-denominated assets? | 46 |
fomc | 2,000 | I should have that number right in front of me somewhere, but I'd say it's about $30+ billion at current market values. | 26 |
fomc | 2,000 | The combined total of our holdings and the Treasury's of both yen and euro-denominated assets? | 19 |
fomc | 2,000 | When the dollar is very strong, as it has been, the value of those foreign currency holdings goes down. That is a factual matter. I'm sorry I don't have the precise number. | 37 |
fomc | 2,000 | The number that stuck in my mind from a couple years ago was $40-$45 billion, so if the exchange translations reduced that, that's great. Is that the right amount to have? | 38 |
fomc | 2,000 | I have no idea what the right amount of foreign currency reserve holdings is for the U.S. monetary authorities. | 22 |
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