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I don't see that in the balance of payments data either. We'll get Q3 data with some lag and then we'll get the foreign direct investment numbers. It's not until we actually have the balance of payments data for the quarter that we get the FDI.
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We do have portfolio data?
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We have portfolio numbers. I think there are hints in that but I wouldn't say there's anything convincing one way or the other. But the Europeans, who on their side may have more data by country that aren't yet published, say this to me.
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It takes a long time for it to go from there to here.
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If there is a slowdown, it's not dramatic yet, that's for sure. But the Europeans seem to be of the view that there has been, and it may just be that they're counting the numbers associated with the mergers and acquisitions that are going through because in some sense that is what has triggered some of the most visible...
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Other questions for Karen or David?
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I have two distinct questions, which are completely separate. The recent earnings warnings that have come out of Apple and Intel--and I believe Xerox and maybe some others--have referred specifically to September sales as being considerably weaker than anticipated. Is there something there that those companies are seei...
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Well, I'll start with the first question on the technology sector. We have not heard uniformly the same kind of reports on weakness in sales that some of the manufacturers have reported. Dell, for example, and Compaq have reported that demand has held up quite well. So at this stage we're nervous but we're not yet will...
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I might be bold enough to add a thought regarding domestic refining, and that is the issue of maintenance. There is some question as to how much refining capacity will be shut down for routine maintenance--whether or not that might be postponed a little. That could give us some leeway to get a bit more product into inv...
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Governor Gramlich.
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I'd like to second Bill Poole's compliment of the Greenbook, not only on the material on oil prices, but also on the simulations with alternative NAIRU and productivity assumptions. I know you've done these before in the Bluebook and elsewhere, but with the potential shocks that are possible now I think it makes sense ...
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Dave, let me ask you a question. In reading the Greenbook and your projections, I know you haven't changed your forecast much from the last time. We need to adjust for energy, I understand. But in listening to you I sensed a little more of an acknowledgement of some downside risks in the economy emerging in manufacturi...
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I'm not sure I would say that in the aggregate I see the downside risks as larger than the upside risks to this forecast. There are a couple of areas that I wanted to highlight. One relates to the developments in the technology sector. Second, while our simulations suggest that the oil price increases should have a rel...
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Thank you.
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President Minehan.
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Thank you, Mr. Chairman. I, too, want to add my thanks to the staff for doing as much work as they did, particularly on the supply side issues, forecasting out further in time, and the alternative productivity and NAIRU simulations. They were helpful to me in thinking about some of these issues. I'm interested in your ...
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With respect to the productivity forecast I'd say two things. One is that we have had occasions where multifactor productivity has risen at this pace for an extended period of time. So this wouldn't be something that is unprecedented historically. Secondly, however, if we were doing a 10- or 15-year forecast, I don't t...
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So this is sort of temporary?
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Yes, in the sense that we're only forecasting out through 2002. Over a long-term horizon I'd certainly hate to be pinned down in forecasting developments in an area where we have not exactly covered ourselves in glory even over the short term. But I would caution that if I were a budget analyst, I wouldn't necessarily ...
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So do you have any idea where this plateaus?
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As the Chairman has noted many times, we're not sure where we are in this technological diffusion process. That knowledge really is so important in terms of getting to the crux of this matter. And it is just terribly difficult to know. Thus far the overall return to capital has not shown any signs of tipping down, thou...
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There has been a bit of a downturn from the very high levels.
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Yes, that's true; there has been just a tad. The downturn is pretty much within the noise of those data at this point. But I would also caution that what we are really observing there is the average return to capital, not the marginal return to capital. If one were concerned about the tech sector, for example, it's pos...
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Yes. Slower growth, higher inflation.
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If nobody else has questions or comments, would somebody like to start the Committee discussion? President Parry.
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Mr. Chairman, employment in the West continued to expand at a solid 2-3/4 percent pace in July and August. In contrast to the remainder of the District, California's job count has slowed somewhat in recent months. The data show weakness in business services, in part due to layoffs at some dot-coms, although indications...
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President Guynn.
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Thank you, Mr. Chairman. I would now characterize growth in our Southeast region as moderate. While conditions have not changed materially since our last meeting, we are seeing some further signs of slowing in the pace of growth, and I will mention just a few. More retailers than before are acknowledging that sales are...
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President Broaddus.
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Mr. Chairman, at our meeting in August the information on our District that I had at the time suggested a more mixed picture in the lower Middle Atlantic region, at least by comparison to the unambiguously strong growth we were seeing in the first half of the year. And the picture is still mixed. As has been mentioned ...
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President Santomero.
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Thank you, Mr. Chairman. It is a pleasure to have an opportunity to talk about conditions in the Third District. Activity in our District is basically flat, with some decline in interest rate sensitive sectors. Employment declined for the first two months of the third quarter, but most of that was attributable to the V...
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President McTeer.
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The economy in the Eleventh District has begun to strengthen modestly in recent months, with employment growth expanding at an annual rate of just over 3 percent. While the national economy has been slowed by the head winds of higher interest rates, higher energy prices, a stronger dollar, and a sputtering stock market...
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President Moskow.
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Thank you, Mr. Chairman. On balance, the economic expansion in the Seventh District continues to show signs of slowing amidst continued tight labor markets and reports of increasing pressure on profit margins from higher costs, particularly for wages, health care benefits, and energy. So far competition has kept many f...
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President Jordan.
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Thank you, Mr. Chairman. Recently one director started off the go-around at our board meeting by relating what he considered to be an anecdote about conditions in labor markets. But I interpreted it somewhat differently, and I'll come back to that. He said he overheard another customer in a store where he was shopping ...
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Thank you. To avoid the coffee break running into lunch, I suggest we pause here and resume with Tom Hoenig.
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Mr. Chairman, before we resume our discussion, let me mention the Basel capital accord. If all goes well, on our present schedule the Basel Committee will approve the new accord at a meeting to be held in New York in mid-December. I thought it might be useful to take advantage of the December meeting of this Committee ...
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President Hoenig.
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Thank you, Mr. Chairman. The Tenth District as a region is continuing to do very well in terms of economic activity, but it is apparent to us that growth is slowing. While overall employment growth in the District is about the same as in the nation, private employment growth is about 1/2 percentage point slower overall...
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President Minehan.
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Thank you, Mr. Chairman. As the headline in the Wall Street Journal's New England Economic Focus put it: "Economy slows, but very gently." In fact, it is rather hard to see the slowing. Housing is off a bit but manufacturing and manufactured exports remain strong. Employment growth, net of strike and Census worker nois...
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President Stern.
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Thank you, Mr. Chairman. The economy of the Ninth District remains healthy, but I think there are signs of moderating activity. On the positive side, labor markets continue to be very tight. The agricultural sector is doing better than expected, mainly because crops are turning out to be very large. The mining and ener...
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Vice Chair.
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Mr. Chairman, the Second District's economy has continued to expand at a moderate pace since my last report, while consumer price inflation has remained subdued in the face of ongoing, though diminishing, cost pressures. After adjusting for the Verizon strike, private sector job growth accelerated noticeably in August ...
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President Poole.
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Mr. Chairman, as I wander around my District, I always ask the question "What's new?" And the answer is not much. It seems to be pretty much steady as she goes. I recently had a trip to Jefferson City, which is obviously not a very big market. The overall unemployment rate there is around 2 percent and the big issue in...
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Governor Gramlich.
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Thank you, Mr. Chairman. Using what I'll call a level test, I think that overall monetary policy is roughly in balance. With real interest rates in the neighborhood of 4 percent, minimal term premiums, and a core inflation rate of about 2 percent, the equilibrium funds rate should be in the neighborhood of 6 percent. A...
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Governor Ferguson.
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Thank you, Mr. Chairman. Like others, my read of the incoming data is that they do point mainly to a continued moderation in economic growth to a pace that I believe is below the economy's potential. In addition to the economic data that have come in, I think the more forward-looking indicators of real activity also su...
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Governor Meyer.
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Thank you, Mr. Chairman. I will focus my remarks this morning on what I view as the three key themes in the Greenbook forecast. While David Stockton has already emphasized the considerable uncertainty that attaches to each of them, these themes are consistent with the qualitative aspects of my own view of the outlook. ...
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Governor Kelley.
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Thank you, Mr. Chairman. Over time it has seemed to me that there is a certain recurring rhythm to the work of this Committee. There are times when we are faced with a need to reassess the appropriate fundamental course of policy and other times when we are focused on questions of how much impetus may or may not be nee...
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Thank you very much. Don Kohn.
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Mr. Chairman, at its last two meetings, the Committee kept the stance of policy unchanged, but expressed concern that the risks going forward were tilted toward higher inflation. The information you've received since August would seem to support a judgment that those risks remain contained, and that policy can again be...
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Questions for Don? If not, considering the late hour I'll try either to say less or to speak faster or some combination of the two! The members' response to the latest Greenbook suggests to me that everybody likes the alternative simulations presented there by the staff. The trouble is that each simulation gives us a d...
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I concur with your recommendation, Mr. Chairman, to keep the fed funds at its current level and to retain the statement that the balance of risks is on the inflation side.
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Tom Hoenig.
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I can accept your recommendation, Mr. Chairman, although I think we could go to a more balanced stance. But we can wait.
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President Guynn.
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I support your recommendation, Mr. Chairman. The argument has been well made.
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President Minehan.
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I support your recommendation, Mr. Chairman.
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President Broaddus.
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I support your recommendation, Mr. Chairman.
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President Poole.
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Mr. Chairman, I support the recommendation. I would like to point out, though, that if we were using the old directive language I think there would be a case for symmetry. In my view there is about equal probability that the next move would be up or down. But the danger with trying to read that interpretation into the ...
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Yes it does.
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Well, I don't think it is of the same magnitude.
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It had the same effect of cutting OPEC production by a fairly significant amount.
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Well, let me comment about that. I think we have always understood that monopolies make prices high. They do not make prices rise. And there is no question that in the face of strong demand it is in the interest of a monopoly to exploit a strong demand to raise prices.
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Demand was not strong. The data indicating strengthening demand are very recent. It was not strong in 1998.
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No, what I'm saying is that oil prices bottomed out in 1998 and there has been a very strong worldwide recovery in the last four to six quarters. Worldwide there has been an economic boom.
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Yes, but we don't know to what extent the domestic demand numbers, which have unquestionably taken off, reflect consumption or tertiary inventory accumulation.
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I agree that there is an inventory cycle that is very hard to understand. By inventories I mean the inventories that are invisible and that we don't have any direct data on. I have no quarrel with that. But I am saying that I don't think it's an accident that we have rising oil prices in the context of a worldwide econ...
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If Saddam does something, you'll change your mind?
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That will add to our woes, no question about it.
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Indeed! President Moskow.
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I agree with your recommendation, Mr. Chairman.
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Governor Kelley.
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I agree with your recommendation, Mr. Chairman.
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Governor Ferguson.
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I support your recommendation, Mr. Chairman. I'd also like to make one comment. I think Don Kohn did us a great service by getting us focused on this creeping inflation issue. I'm not quite sure what the answer is but I think we will come back to it. I heard Jerry Jordan also raise some concern about this issue.
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President Jordan.
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I support the recommendation.
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President Santomero.
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I support the recommendation.
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Governor Gramlich.
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I support the recommendation.
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Governor Meyer.
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I support the recommendation.
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President McTeer.
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I agree.
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President Parry.
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I support your recommendation.
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