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fomc | 2,000 | I agree that the presentations gave a very nice sense of the uncertainties that we face. I have a question about the inventory situation, given that inventories are so often a major part of cyclical processes. My impression from looking at the data and the charts is that inventories are not far out of line. We have not... | 120 |
fomc | 2,000 | I think your description is pretty close to the one that I would give as well. There has been some backing up in inventory levels. If we went back four or five months, we would have been hard pressed, outside of maybe some hints in automobiles, to see much in the way of inventory problems developing. But in recent mont... | 274 |
fomc | 2,000 | May I just raise a caveat with respect to that? Historically during recessions we basically were looking at an essentially trendless inventory/sales ratio. And the types of cyclical patterns President Poole was referring to involved bulges that looked obviously far greater than the one that we now have. But in the last... | 287 |
fomc | 2,000 | Several years ago. | 4 |
fomc | 2,000 | Okay, several years ago. But that number has moved up, which does tend to square with what Dave Stockton is saying. It's not an abnormal concern, but clearly it is edging up. Were final sales to slow, my suspicion is that that particular number would go up quite noticeably. But reading inventories is not as easy as it ... | 140 |
fomc | 2,000 | One more comment on inventories? As one who in an earlier incarnation had responsibility for managing inventories, the technology that's available to managers today is light years better than we used to have some time ago--not only information technology but many other things as well. As a consequence, there's a micro ... | 126 |
fomc | 2,000 | One would almost assume that, on the grounds that in fully automated retail establishments the bar codes check out what is being sold and items are automatically reordered. So the long lag in bookkeeping, where inventories could build up before one knew it, no longer exists. Adjustments occur very quickly. If sales go ... | 98 |
fomc | 2,000 | But perhaps increasingly. | 4 |
fomc | 2,000 | Yes, no question about it. In fact the "only partly" issue is the answer to how far out on the S curve we are in a technological sense. President Parry. | 37 |
fomc | 2,000 | Dave, in the forecast, your estimate of potential growth for the next two years is in the low 4 percent area or something like that. We have forecast GDP growth of 2-1/2 percent, roughly, and have discussed the risk that it could be even slower than that--perhaps by a percent or two. Should our response and thoughts ab... | 131 |
fomc | 2,000 | I think that's a very interesting question. It's one that we've been kicking around, but I'm not sure we have a complete answer to it. It's obvious in some sense that with higher underlying potential output growth, a 2 percent shortfall would still give us growth of around 2 to 2-1/4 percent whereas when potential outp... | 292 |
fomc | 2,000 | But the consequences of the growth rate declining to, say, 0 to 2 percent could be even more significant. One could get greater employment effects et cetera., and the impact on inflation eventually could be even stronger. | 45 |
fomc | 2,000 | Yes, I agree. That is absolutely correct. | 10 |
fomc | 2,000 | Further questions for our colleagues? If not, would somebody like to start the Committee discussion? Go ahead, President McTeer. | 26 |
fomc | 2,000 | In the Eleventh District the slowing economic growth that I've reported at the last two FOMC meetings has continued and has become more widespread. Weaker growth is apparent nearly everywhere. At last Thursday's board of directors meeting there was considerable discussion of anemic retail sales and the enormous discoun... | 876 |
fomc | 2,000 | President Minehan. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. Current data suggest that the New England economy continues to grow at a solid pace, with very low unemployment and higher inflation than the rest of the nation. But recent Beigebook and other contacts suggest an increasing sense of caution about the future. In addition, a survey we conducted r... | 1,142 |
fomc | 2,000 | President Jordan. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. Speaking from the old economy region of the country in contrast to the new economy region, the view really is quite different. At a joint board of directors meeting of our three boards last Thursday, one of the directors cited an index that I had never looked at before. She said that in the thr... | 133 |
fomc | 2,000 | It's too cold to go out! | 7 |
fomc | 2,000 | Exactly. First, on construction, public sector construction spending in the region remains strong, but residential, commercial, and industrial are all down, and most expectations are that activity in 2001 will be below that experienced in 2000. Inventories of construction materials are said to be high, and the earlier ... | 1,362 |
fomc | 2,000 | President Guynn. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. The evidence is now clearer that the pace of growth has slowed in our Southeast region, although some sectors continue to perform quite well. Single and multi-family housing permits, units under construction, and home sales are flat to down slightly from year-ago levels, although still at respe... | 1,116 |
fomc | 2,000 | President Hoening. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. Since our last meeting, the District has continued to expand, but quite modestly, and there are additional pockets of weakness and some new areas of concern within the regional economy. There have been some highly publicized layoffs, although the actual level of employment has remained relative... | 1,133 |
fomc | 2,000 | President Broaddus. | 5 |
fomc | 2,000 | Mr. Chairman, the signs of slower growth in the national economy are now more clearly reflected in our District economy than they were at the time of our last meeting. Consumer spending in particular has throttled down and home sales and housing construction have continued to moderate. We are hearing more reports now a... | 1,188 |
fomc | 2,000 | President Parry. | 4 |
fomc | 2,000 | Mr. Chairman, employment growth in the Twelfth District has continued to moderate in recent months. District payrolls have expanded at a 2-1/4 percent pace in recent months, somewhat below the 3 percent pace of the first half of the year. More moderate employment growth and declines in the market values of high-tech st... | 855 |
fomc | 2,000 | President Moskow. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. Economic activity in the Seventh District has definitely slowed further over the past month or so, and many contacts indicate that additional slowing is likely. Labor markets are still tight, but an increasing number of layoffs and plant shutdowns have been reported. Construction is one of the ... | 1,049 |
fomc | 2,000 | President Stern. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. I would describe economic conditions in the District as steady, but sentiment has changed recently and significantly so, as best I can judge. Clearly, people are becoming more cautious and more concerned about the outlook. I think financial market developments have something to do with that, wi... | 527 |
fomc | 2,000 | President Santomero. | 5 |
fomc | 2,000 | Thank you, Mr. Chairman. Incoming data suggest that the slowdown in economic growth continues in our region and in the nation. The real question is whether growth is slowing too much so that the economy will enter a recession. My own reading is that this is still a growth slowdown and that the economy is not heading to... | 1,018 |
fomc | 2,000 | Governor Gramlich. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. At the last meeting I said that the situation was sufficiently unclear that I was glad there were others to participate in our decisions. This time around conditions have changed enough that the picture is coming into clearer focus for me. To get right to the bottom line, I think monetary polic... | 1,094 |
fomc | 2,000 | Governor Ferguson. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. I think the staff is to be commended for accurately representing in its baseline forecast what I believe is a preponderance of the quantitative evidence. The only problem I have is that the baseline forecast in the Greenbook strikes me as a triumph of hope over reality; I certainly believe that... | 721 |
fomc | 2,000 | Governor Meyer. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. There are two key questions that highlight, at least for me, the challenges in making the forecast and setting the course of policy today. First, is the growth rate in the Greenbook forecast over the next few quarters or the rate of revision in that forecast over the two most recent intermeetin... | 664 |
fomc | 2,000 | Governor Kelley. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. Things have been moving fast recently. Two meetings ago we thought we might have a real slowdown at hand but could not yet be sure. At the last meeting it was clear that a slowdown was under way but its characteristics were not yet ascertainable. Today we are confronted with several recent week... | 602 |
fomc | 2,000 | Vice Chair, top that if you can! | 9 |
fomc | 2,000 | There is no way I can top that! Mr. Chairman, the Second District's economy continues to expand, though at a more subdued pace than in some time. Cost and wage pressures persist, but there are few signs that these increases are being passed along to consumers. Private sector employment grew at a brisk 1-1/2 percent ann... | 674 |
fomc | 2,000 | Finally, President Poole. | 6 |
fomc | 2,000 | Thank you, Mr. Chairman. In recent weeks at the St. Louis Fed we've had luncheons with investment professionals from the St. Louis area and with senior officials from biotech firms. The message from them is very similar to the one we've heard around the table, one of a great deal of caution. The people I've talked with... | 685 |
fomc | 2,000 | Let me ask--did you land or didn't you land? | 12 |
fomc | 2,000 | Well, I did not end up in the drink! I had some helping hands, although on one occasion the instructor forgot to put the hook down, so there was no catch on the deck, and we pushed the throttle forward and took off again. What it amounts to is a $20 million video game and it's a lot of fun! Anyway, we don't want to pro... | 481 |
fomc | 2,000 | Thank you very much. Is the coffee out there? | 11 |
fomc | 2,000 | Yes, it is. | 5 |
fomc | 2,000 | Let's recess. | 3 |
fomc | 2,000 | Don Kohn. | 4 |
fomc | 2,000 | The information becoming available in the few weeks since your last meeting has reinforced the perception that the economy has entered a period of adjustment of uncertain dynamics and dimensions. The Committee tightened policy from mid-1999 to mid-2000 in order to slow economic expansion to a more sustainable pace. Thi... | 2,123 |
fomc | 2,000 | Questions for Don? | 4 |
fomc | 2,000 | Two questions, Don, that may lead into one. At this time last year, we had a funds rate of 5-1/2 percent. We were really constrained then from doing anything because of Y2K, but we were learning at that time of upward revisions to growth, reinforced by the anecdotal information that things were coming in much stronger.... | 327 |
fomc | 2,000 | Dave might want to speak to this as well, but in the Greenbook forecast the 6-1/2 percent funds rate is slightly restrictive. It is consistent with the economy growing below the rate of potential, so the unemployment rate is rising. It is not greatly restrictive, but I think it's slightly restrictive. And as I noted in... | 158 |
fomc | 2,000 | That leads into my second question because I read the Bluebook as saying that the reason for holding the funds rate at 6-1/2 percent is the desire to have the unemployment rate rise to 5 percent and to hold growth below potential. So, if you don't want to raise the unemployment rate and hold growth below potential, the... | 109 |
fomc | 2,000 | If you were absolutely certain about the course the economy was going to take and there was no uncertainty about the NAIRU or about the strength of demand--if you keyed in on these point forecasts as what you expected to happen--then I think that rationale would carry through. In other words, it would carry through if ... | 208 |
fomc | 2,000 | One more brief follow-up question: Am I right that given the Greenbook forecast for inflation, nominal spending, trucks, and houses, and everything else, if the current unemployment rate were 5 percent, then you would say "cut"? | 48 |
fomc | 2,000 | And if the NAIRU were perceived to be 5 percent. Then that assessment probably would be more likely. | 23 |
fomc | 2,000 | Further questions for Don? Let me start then. There continues to be some divergence of views among Committee members, and those views have changed fairly significantly from where they were two meetings ago. Not only have the average and the median of those views moved, but I think the tails of the distribution have mov... | 2,035 |
fomc | 2,000 | Mr. Chairman, I agree fully with both the conclusions you've reached and the reasoning for them. I believe that the most important thing in public life is to know what you don't know. And we don't in fact know enough at this point to move the rate downward. Doing so would be unwise, in my view, especially for the reaso... | 113 |
fomc | 2,000 | President Poole. | 4 |
fomc | 2,000 | Mr. Chairman, as you know from my earlier comments, I would have preferred to reduce the federal funds rate at this meeting by 25 basis points. Let me try to put my position this way. On the issue of when to ease we can ask the question in two ways. Obviously, the market fully expects an easing at the beginning of next... | 346 |
fomc | 2,000 | President Hoenig. | 4 |
fomc | 2,000 | Mr. Chairman, I too would prefer moving now. I think the funds rate is high and the effect has been to slow the economy as intended. In my view a quarter point reduction in the rate now would still leave us with a tight policy, one that continues to slow the economy, and yet it would recognize the risks that we've talk... | 103 |
fomc | 2,000 | President Parry. | 4 |
fomc | 2,000 | Mr. Chairman, I can certainly accept your recommendation. When I was thinking about that possibility at the end of last week, I was concerned that the markets might find it a bit confusing in terms of what we are trying to communicate. Ironically, as it turns out, the article that appeared in the Wall Street Journal ma... | 146 |
fomc | 2,000 | President Moskow. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. I have a slight difference of opinion with my colleague, Mr. Parry, on the Wall Street Journal article. I consider that article very unfortunate because when leaks like that occur I think it makes us look bad as a central bank. We've had this discussion before. So, I don't see any good side to ... | 244 |
fomc | 2,000 | Mr. Chairman, I thought the article was abominable. | 13 |
fomc | 2,000 | Now you agree! So do I. | 8 |
fomc | 2,000 | Okay. | 2 |
fomc | 2,000 | President Guynn. | 4 |
fomc | 2,000 | Mr. Chairman, I would prefer not to ease today. I don't know how you scored me on your note pad, but in the go-around I was trying to convey that I came with a view that a balanced risk statement would be the proper first move. My staff would tell you that we were debating until I left for the airport whether the slowd... | 205 |
fomc | 2,000 | President Santomero. | 5 |
fomc | 2,000 | I support your proposal for the reasons you stated, Mr. Chairman. As President McDonough indicated, it's also important that we recognize what we don't know and not communicate to the marketplace something that we didn't intend to convey by moving at this point. | 50 |
fomc | 2,000 | Governor Gramlich. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. As you know, the policy you suggested is not my first choice. Obviously, there is a lot of uncertainty out there, but I share the view of a few others around the table who think that we've seen enough to ease fairly soon. On the other hand, if we all agree to stand by our telephones, [Laughter]... | 114 |
fomc | 2,000 | President Minehan. | 4 |
fomc | 2,000 | Thank you, Mr. Chairman. I certainly don't want to be predictable but I suppose I am in this regard. | 23 |
fomc | 2,000 | Sorry about that! I was just reporting as a statistician. | 13 |
fomc | 2,000 | What do they say about consistency being the hobgoblin of something? I'm also not in favor of retaining any particular policy solely to move the unemployment rate up. I don't know where the NAIRU is; I don't know whether anyone really knows where it is right now. But I do continue to see resource constraints in labor m... | 361 |
fomc | 2,000 | Well, you have to stand by, you just don't have to answer! [Laughter] | 19 |
fomc | 2,000 | No, I intend on answering. | 7 |
fomc | 2,000 | Governor Kelley. | 3 |
fomc | 2,000 | I support your recommendation, Mr. Chairman. | 9 |
fomc | 2,000 | President Stern. | 3 |
fomc | 2,000 | I generally support your recommendation. Let me briefly make two other comments. First, I do share some of Bob Parry's concerns that a statement about risks weighted toward economic weakness is going to raise the question of why didn't we act now. Hopefully, we will have some language in the announcement that will at l... | 150 |
fomc | 2,000 | President Broaddus. | 5 |
fomc | 2,000 | Mr. Chairman, let me say first that I can accept your proposal. I definitely recognize the downside risks and I am getting the same kinds of messages as everyone else. My preference would have been to have a balanced risk statement. My concern with this move is that it is not yet fully priced in the markets. And I thin... | 199 |
fomc | 2,000 | "We are not yet panicking!" | 7 |
fomc | 2,000 | I don't think we will make you our press secretary! | 11 |
fomc | 2,000 | I'm expressing my preferences! | 5 |
fomc | 2,000 | President Jordan. | 3 |
fomc | 2,000 | Thank you, Mr. Chairman. Jack Guynn said he was still debating when he left for the airport yesterday. I'm still debating now! Clearly, based on what I said earlier, if the reason for not lowering the funds rate is because we're waiting for the unemployment rate to go up, then I can't agree with that. So if the press s... | 125 |
fomc | 2,000 | I can tell you that the preliminary press statement does not include such a reference. | 16 |
fomc | 2,000 | Okay. The other reason for not moving is because it's awkward to go from a balance of risks toward inflation to a balanced risks statement, which would seem to be out of tune with reality. I would find that troubling. And I've always thought that whenever we reached the point where we had to announce a balance of risks... | 132 |
fomc | 2,000 | May I ask you a question? Why don't we have that problem, no matter which direction we see the risks, every time we move to an asymmetric statement? | 32 |
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