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fomc | 2,000 | I take it that's from a framework similar to the Greenbook and maybe that's my problem. But beginning with an unemployment rate of 3.9 percent, where the long-run NAIRU might be closer to 5-1/2 percent, it just seems a bit premature to be worrying about that. If we were at a different starting point, then I would agree... | 81 |
fomc | 2,000 | President Hoenig. | 4 |
fomc | 2,000 | Don, my question is similar to Governor Meyer's. It strikes me that how you view the risk statement depends on how you view monetary policy right now. And this is what I think you were just saying: Suppose you view monetary policy right now as tight--that is, the funds rate is above the natural rate, whatever term you ... | 166 |
fomc | 2,000 | Suppose you started from the premise that the Committee had already acted over the past year and a half to tighten monetary policy, consistent with an outlook that the economy is operating beyond its potential and inflation is likely to go up. If that were the case, you might judge that the Committee had already put mo... | 265 |
fomc | 2,000 | Further questions for Don? Let me start then. The forces that in my view have been most prominent since the last meeting are the still high level of oil and energy prices and the evident weakening of profit margins. In combination, those forces have interacted and exerted a significant effect on the capital goods marke... | 2,735 |
fomc | 2,000 | Mr. Chairman, I find myself exactly where you are. I believe that we have to stay with the balance of risks on the side of inflation but we also have to express our view that the real world has changed somewhat. The proposed verbiage certainly sounds like something a central bank would produce. [Laughter] Since we are ... | 99 |
fomc | 2,000 | President Poole. | 4 |
fomc | 2,000 | Mr. Chairman, first of all I agree that we should hold steady on the federal funds rate. But I would prefer a balanced risks statement, and let me give you the logic of my argument. It seems to me that the way monetary policy works today is that we maintain a firm medium-run and long-run commitment to low and stable in... | 488 |
fomc | 2,000 | President Hoenig. | 4 |
fomc | 2,000 | Mr. Chairman, I too would prefer a balanced risks statement, and my reasons are perhaps similar to Bill Poole's. I think we do have upside risks for inflation, which we are addressing. That's why we have a fed funds rate at the level it is now, which I believe indicates a fairly tight policy. And I think by holding tha... | 222 |
fomc | 2,000 | Governor Ferguson. | 3 |
fomc | 2,000 | I'm sorry you got to me so quickly! [Laughter] | 13 |
fomc | 2,000 | Do you want to pass? | 6 |
fomc | 2,000 | No, I don't want to pass. The reason I said that is that I'm actually very sympathetic to the points that Presidents Hoenig and Poole just made. I think we've worked too hard to be as honest and transparent with the market as possible. So if we really think that the risks are balanced, we should say the risks are balan... | 229 |
fomc | 2,000 | President Parry. | 4 |
fomc | 2,000 | Mr. Chairman, I certainly support your recommendation for an unchanged funds rate, and I also think it's important to retain the statement of prior meetings that the balance of risks is toward higher inflation. I believe it is important as well to explain this in terms of developments that have occurred since our last ... | 77 |
fomc | 2,000 | President McTeer. | 5 |
fomc | 2,000 | I would strongly prefer a statement of balanced risks, not because I think the inflation risk has diminished, but because the risk on the down side has increased substantially. And as Bill Poole said, that assessment could be communicated in the press release so as not to give the market the wrong idea. I happen to bel... | 248 |
fomc | 2,000 | Governor Kelley. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. I strongly support your recommendation. I fear that if we went to neutral language, it would be read by the market as the first step in an easing cycle. Many in the market expect that and I think they would see a change of that sort as confirming their belief. And I believe that could prove to ... | 160 |
fomc | 2,000 | President Guynn. | 4 |
fomc | 2,000 | Mr. Chairman, I'm comfortable with the proposition you've put on the table, subject to whatever editing of the press statement we decide to do. I've scribbled a whole page of notes in support of no change in the bias, thinking that we were going to have that level of discussion. But I'll spare myself and everyone else ... | 208 |
fomc | 2,000 | I'm sorry, did you say you want to make a different-- | 13 |
fomc | 2,000 | If it turns out in the course of the go-around-- | 12 |
fomc | 2,000 | Oh, I see what you mean. | 8 |
fomc | 2,000 | I'd like to come back and give you the rest of my arguments in favor of retaining the bias, if in fact it comes to that. | 28 |
fomc | 2,000 | In other words, you want a vote recount? [Laughter] | 14 |
fomc | 2,000 | I think we just won the argument! [Laughter] | 12 |
fomc | 2,000 | Machine or hand count? | 5 |
fomc | 2,000 | President Stern. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. I support your recommendation. For some time I've believed that our policy is positioned about where it should be. That continues to be my view. We obviously haven't had to take any action in the last several months, and that's fine. I would have trouble changing the balance of risk statement b... | 163 |
fomc | 2,000 | President Moskow. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. I agree completely with your recommendation both on keeping the balance of risks toward higher inflation and the language that you read. I agree with President McDonough that it is central bankish type of language, and maybe I've been here too long, but I thought it was very well stated! [Laugh... | 296 |
fomc | 2,000 | I've heard that if you rig the numbers in the beginning, you won't have to do a recount. | 20 |
fomc | 2,000 | We have many different ways of accomplishing-- | 8 |
fomc | 2,000 | I don't want to hear any more! [Laughter] President Santomero. | 17 |
fomc | 2,000 | I support the proposed statement. I, too, came prepared with a long list of arguments on why we should remain where we were in terms of the tilt. I'll forgo those and forgo any request to come back and discuss them further. I find myself in complete agreement with both the wording and the logic behind it. I recognize t... | 165 |
fomc | 2,000 | First Vice President Pianalto. | 6 |
fomc | 2,000 | I also agree with your recommendation. Like others, I was prepared to make a longer statement in case the recommendation was to change the tilt. And my reason for that is that I am concerned about our objective of achieving price stability. But like others, I will also spare you from the statement. | 59 |
fomc | 2,000 | President Minehan. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. I also agree with both the direction of your policy recommendation, i.e., no change in the funds rate, and with the tilt recommendation. I think Gary Stern summed up my thoughts about these issues quite completely. We shouldn't overreact to the fact that the expansion is slowing. We wanted it t... | 128 |
fomc | 2,000 | Governor Gramlich. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. The last thing I want to do is to inspire a bunch of lectures from the other side of the table, [Laughter] so I will support the statement. It is indeed a close call for me. At the same time, let me make two points. I think we are getting very close to the point where the risks are nearly balan... | 410 |
fomc | 2,000 | President Broaddus. | 5 |
fomc | 2,000 | Mr. Chairman, I strongly favor the policy position you're recommending, the asymmetry. And I would just underline what Gary Stern said. I thought he made an interesting observation, namely that it would be very difficult at this point to explain why we would change to a balanced statement. And I think that would just f... | 236 |
fomc | 2,000 | Governor Meyer. | 3 |
fomc | 2,000 | Mr. Chairman, I support your recommendation in all respects. Specifically, I think we should retain the statement of unbalanced risks. And I thought the statement that you read was excellent. | 37 |
fomc | 2,000 | Time to vote. | 4 |
fomc | 2,000 | Thank you. It's time to vote, indeed. Would you read the appropriate language? | 17 |
fomc | 2,000 | The wording comes from page 12 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 w... | 147 |
fomc | 2,000 | Call the roll, please. | 6 |
fomc | 2,000 | Chairman Greenspan Yes Vice Chairman McDonough Yes President Broaddus Yes Governor Ferguson Yes Governor Gramlich Yes President Guynn Yes Governor Kelley Yes Governor Meyer Yes President Moskow Yes President Parry Yes | 41 |
fomc | 2,000 | Do you want Lynn Fox to pass out the draft statement? You already have read most of the statement. | 21 |
fomc | 2,000 | I've read the part of the statement relating to our assessment of the risks. Well, you can pass it around if anyone wants to take a look at it. Let me just read the first paragraph to you. "The Federal Open Market Committee at its meeting today decided to maintain the existing stance of monetary policy, keeping its tar... | 103 |
fomc | 2,000 | Would somebody like to move approval of the minutes for the November 15th meeting? | 17 |
fomc | 2,000 | So move. | 3 |
fomc | 2,000 | Second. | 2 |
fomc | 2,000 | Peter Fisher. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. I'll be referring to a package of charts with a peach or salmon cover that should be in front of you.1 The first page depicts deposit rates on forward contracts. U.S. current and forward rates have moved lower since the last FOMC meeting, most noticeably in a series of steps. The first such ste... | 2,497 |
fomc | 2,000 | Refresh my memory, what's the difference between A and P? | 12 |
fomc | 2,000 | One is the S&P terminology and the other is Moody's. | 13 |
fomc | 2,000 | Which is which? | 4 |
fomc | 2,000 | A is S&P, am I right? | 9 |
fomc | 2,000 | A is S&P, P is Moody's. | 10 |
fomc | 2,000 | Let me ask about the sharp drop in the 10-year swap differentials associated with the December 5th speech. This is an arbitrage operation. What is it that makes rates move or can induce that sort of response on an arbitrage operation? | 51 |
fomc | 2,000 | Well, the whole yield curve began to move. I think the mortgage portfolio managers looked at your speech and saw in it a mix of a soft landing forecast and an easing forecast without date specificity. And they came to feel a need to rush and anticipate the hedging needs for their portfolios this late in the year. And t... | 144 |
fomc | 2,000 | If they had those expectations, wouldn't you expect to see it more pronounced in the 2-year swap? It depends on whether it's solely a mortgage hedging operation, and it's obviously not. But the way you described it there was a sort of broader soft landing, monetary ease notion. If that were the fundamental concept from... | 84 |
fomc | 2,000 | The explanation offered to me relates to the availability of futures market substitutes. That is, the overall hedging market at the short end of the yield curve is so much deeper than at the current longer end of the yield curve, the 10-year, that the result is this exaggerated swing. And were this not happening at a y... | 81 |
fomc | 2,000 | Finally, on the commercial paper spread issue, I assume on the supply side that there's really no shift from A1s to A2s that would alter the supply position here. That's a very rare event as I recall. So it's truly the result of all of the telecom paper that they held; they thought it was a good investment but became d... | 103 |
fomc | 2,000 | I don't know. | 4 |
fomc | 2,000 | In other words, if you became disenchanted with telecom A2/P2 paper, the presumption, I would assume, is that you became disenchanted with the companies. The amount of paper issued in the timeframe it took for, say, the 30-day rate to surge couldn't be very much. So it had to be what they were previously holding. I hav... | 106 |
fomc | 2,000 | I guess I would share that sentiment. I'm trying to rack my mind on this; I have a sense here that the commercial paper market lagged slightly what happened to the firms' equity values in this case, and it's playing catch-up. | 48 |
fomc | 2,000 | What happened to efficient market theory? [Laughter] | 11 |
fomc | 2,000 | No comment. | 3 |
fomc | 2,000 | Different people handling the portfolio who don't talk to each other. | 12 |
fomc | 2,000 | Thank you, sir, that's very helpful! Further questions for Peter? Yes, Governor Gramlich. | 20 |
fomc | 2,000 | Peter, on your page 5, there is a very visible spike in the lower left panel. Was there some particular event that caused that? | 29 |
fomc | 2,000 | This is the roll into December, the point at which the 30-day paper carries over into the new year. | 23 |
fomc | 2,000 | President Jordan. | 3 |
fomc | 2,000 | On the same page, Peter, my puzzle was just a little different from the Chairman's puzzle on the bottom part because I was looking at the red line going up last year and this year, and I was thinking that the A2/P2 didn't go up as much this year. But what's going on with the A1/P1 that the yield is just flat across the... | 116 |
fomc | 2,000 | To elaborate on what I'd hoped to convey in my remarks, I think it's a flight to quality issue of the substitution for Treasury bills being much more pronounced. In the prior years, there's a sense that the total sum of balance sheet credit to be offered is being constrained as the intermediaries want to slim down for ... | 157 |
fomc | 2,000 | Any further questions for Peter? Vice Chair, do you want to use your usual-- | 17 |
fomc | 2,000 | Move approval of domestic operations. | 6 |
fomc | 2,000 | I usually don't get the request for a motion out in time! You move approval before I get the words out. | 23 |
fomc | 2,000 | Well, I'll tell you what I was thinking about. In further answer to Jerry Jordan's question, if you look back at 1996-97, the A1/P1 line was very flat then. In 1997-98 we had the Asian crisis, in 1998-99 we had the Russian crisis, and in 1999-2000 we had Y2K. So one can argue that this year is the closest thing we've h... | 130 |
fomc | 2,000 | If you say it fast enough, it has a certain tenor! Shall we move on to the economic report? Dave Stockton and Karen Johnson. | 28 |
fomc | 2,000 | Thank you, Mr. Chairman. I thought that perhaps I could make a useful contribution to the meeting this morning by dispensing with my usual briefing and moving straight to the question and answer period. And, as a holiday offering to you, I propose to pose the questions, as well as answer them. In my view, there would a... | 2,054 |
fomc | 2,000 | Let me first update you on the implications for our outlook of the data we have received since the Greenbook forecast was finalized. Last week the balance of payments data for the third quarter were released, and this morning trade data for October became available. The nominal trade balance narrowed slightly in Octobe... | 1,170 |
fomc | 2,000 | Mr. Chairman, I don't really have a question but I have an issue I want to raise if no one is going to ask a question. I'm not sure this is the right time to do it, but I don't know when else on the agenda to do it. The issue relates to the new legislation that reinstitutes our semi-annual monetary policy reports. I be... | 260 |
fomc | 2,000 | President Broaddus, I think not. In my view that legislation was merely a compromise to get the reporting requirement through and reinstate it. If the issue of how the statistics are presented or evaluated is disputable, it is on a very minor level. The notion of whether we go to a specifically different type of policy... | 252 |
fomc | 2,000 | If I may say so, I would hope that we would look for opportunities to consider alternative approaches. It worries me that we no longer have anything like the ranges for the aggregates, which for all of their weaknesses in recent years were a fairly objective anchor, at least at the beginning, for our longer-run policy ... | 64 |
fomc | 2,000 | I think it certainly has been the general view of the Committee, as evidenced by the nature of our discussions, that long-term price stability is our objective. It's unambiguous, unequivocal, and I would say held pretty much by everyone around this table. The only operative question is whether it is statutory or not. A... | 84 |
fomc | 2,000 | Okay. | 2 |
fomc | 2,000 | In support of your perceptions, Mr. Chairman, there actually was an attempt by some senators to embody an explicit price stability goal in the legislation. And others who were involved at the committee level objected to that and did not want to go to that point. | 52 |
fomc | 2,000 | Just one point to follow up on that: One possible way to operate is to note that while we're no longer required to report targets for the monetary aggregate it doesn't mean that we shouldn't be monitoring and looking at them. They still play the role of anchoring a sense of inflation targeting. | 57 |
fomc | 2,000 | Vice Chair. | 3 |
fomc | 2,000 | Mr. Chairman, two points: One, I associate myself with your comments 1000 percent, which is 10 times more than the usual enthusiasm with which I support your views. | 37 |
fomc | 2,000 | Last time I recall 1000 percent being used that way was in a Presidential campaign [laughter] and it didn't work out very well! | 29 |
fomc | 2,000 | This will work out better! My second point is on the staff presentations. I think the reason there seem to be no questions or comments is that the presentations were remarkably good and extremely well balanced. I'd like to note that I thought Karen's presentation of the balance of risks internationally was right on the... | 71 |
fomc | 2,000 | President Poole. | 4 |
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