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fomc | 2,001 | I will grant that the duration makes a big difference. | 11 |
fomc | 2,001 | Right. | 2 |
fomc | 2,001 | President Stern. | 3 |
fomc | 2,001 | I've been thinking about what we might see in some of the data that will be published over the near term, in particular payroll employment and the impact of seasonal factors. I assume, other things equal, that the seasonals anticipate an increase in employment in December and probably in November, although I'm not sure... | 77 |
fomc | 2,001 | Yes, and I think even in October we reach the front edge of a pickup in seasonal hiring. Obviously that seems less likely and is part of the reason why we would expect ongoing substantial weakness in the employment data. | 43 |
fomc | 2,001 | Right. So even if we don't get further substantial employment reductions, the seasonally adjusted numbers are likely to look fairly lousy. | 25 |
fomc | 2,001 | Yes. We are expecting payroll employment to continue to contract at more than 200,000 a month over the next few months and to contract rather sharply in the first quarter of next year as well. | 40 |
fomc | 2,001 | Okay, thank you. | 5 |
fomc | 2,001 | President Poole. | 4 |
fomc | 2,001 | I have a question about the interpretation of interest rate developments. In the pre-FOMC briefing you mentioned the common view in the marketplace that the budget deficit had something to do with the behavior of longer-term interest rates. It wasn't clear what your own view on that was. I was interested in Chart 1 in ... | 177 |
fomc | 2,001 | Sure. I'd say two things. One, we do think that the longer-run budget outlook and the accompanying fiscal policy that underlie that outlook have been factors influencing long-term interest rates. When I look at that implied one-year forward rate, it currently is showing those rates rising above levels that were prevail... | 192 |
fomc | 2,001 | Any further questions for our colleagues? If not, who would like to start the Committee discussion? President Parry. | 23 |
fomc | 2,001 | Mr. Chairman, the fallout from the September 11 attacks has intensified existing weakness in the Twelfth District economy. The high-tech sector has been struggling for the past year and now the timeline for recovery has been pushed back by business firms in the aftermath of the attacks. The latest figures show that Cal... | 183 |
fomc | 2,001 | Is that residential and commercial? | 6 |
fomc | 2,001 | It's primarily commercial. Southern California had been the main pocket of economic vitality in the District through August, showing substantial strength in housing demand and population-based services like education and health. But weak September employment numbers suggest that the slowdown may be taking hold there as... | 646 |
fomc | 2,001 | President McTeer. | 5 |
fomc | 2,001 | Economic activity in the Eleventh District continued to weaken over the past six weeks. Although the District economy had probably begun to slump even before our last meeting, output declines now appear to be more pronounced and widespread. Four of the District's usual economic drivers--air transportation, energy, bord... | 947 |
fomc | 2,001 | President Minehan. | 4 |
fomc | 2,001 | I don't have any good stories about the Alamo or anything similar. On the Friday morning before Open Market Committee meetings, I usually meet with a group of local investment professionals and economists from the District's largest banks. This group has a pretty good take on credit conditions locally and nationally, o... | 1,221 |
fomc | 2,001 | President Broaddus. | 5 |
fomc | 2,001 | Thank you, Mr. Chairman. Economic activity in our District appears to have declined further in October, but perhaps a bit more moderately than in the weeks immediately after the September 11 attacks. That partly reflects the pattern of retail sales, which dropped less sharply in October than in September, due mainly to... | 1,139 |
fomc | 2,001 | President Stern. | 3 |
fomc | 2,001 | Thank you, Mr. Chairman. As has been the case for some time, the District economy is tracking closely with the national economy. There are some oases of strength but I don't think they are particularly representative, so I won't spend a lot time on them. Overall labor market conditions have eased and layoffs and initia... | 681 |
fomc | 2,001 | President Moskow. | 4 |
fomc | 2,001 | Thank you, Mr. Chairman. On balance the Seventh District economy has slowed further since we met in early October. We're in an unprecedented situation and uncertainty is very high. Many business firms and households are essentially in a wait-and-see mode regarding capital spending plans and consumption expenditures. Bo... | 884 |
fomc | 2,001 | President Guynn. | 4 |
fomc | 2,001 | Thank you, Mr. Chairman. The negative economic trends in our District that reappeared in the third quarter now extend into the fourth quarter. Some sectors have continued to deteriorate as the risks and uncertainties directly attributable to September 11th play themselves out. In particular, tourism, rental car activit... | 1,224 |
fomc | 2,001 | President Hoenig. | 4 |
fomc | 2,001 | Mr. Chairman, the economy in the Tenth District has not really deteriorated since our last meeting, but that's not saying much since it is considerably weaker than it was before the events of September 11th. Layoff announcements have subsided somewhat but remain significantly higher than before the attacks. The composi... | 926 |
fomc | 2,001 | President Santomero. | 5 |
fomc | 2,001 | Thank you, Mr. Chairman. Overall underlying economic conditions in our District have worsened somewhat since our meeting five weeks ago. While there has been a slight rebound from the initial decline in activity we saw after September 11th, the underlying trend still has a downward tilt and our contacts acknowledge a g... | 1,176 |
fomc | 2,001 | President Poole. | 4 |
fomc | 2,001 | Thank you, Mr. Chairman. I want to comment on a few of the highlights from conversations I've had with business contacts. The extent of the weakness in the U.S. economy and its impact on Asia I think was well illustrated by my UPS contact who said that his firm's volume outbound from Asia has been running only one-half... | 732 |
fomc | 2,001 | Okay. It is a little after 11:00 a.m. I understand that coffee is available next door. Let's take a break but try to be back in 15 minutes. | 37 |
fomc | 2,001 | Vice Chair. | 3 |
fomc | 2,001 | Mr. Chairman, the Second District's economy has deteriorated further since the last report, but it is very unclear how much of the weakening can be tied to the terrorist attacks and how much would have happened in any event. Widespread transportation disruptions that developed immediately after the attacks eased substa... | 1,047 |
fomc | 2,001 | President Jordan. | 3 |
fomc | 2,001 | Thank you, Mr. Chairman. Listening to everyone who has spoken so far leads me to feel that it's not much easier today than it was five weeks ago to know what to make of either the economic reports or the anecdotal information available to us. I come to each of these meetings hoping there will be less uncertainty than t... | 2,317 |
fomc | 2,001 | Governor Ferguson. | 3 |
fomc | 2,001 | Thank you, Mr. Chairman. Our decision today, as Jerry Jordan has just indicated, comes at a time of great uncertainty. I think our challenge is to minimize the risk facing our economy in these uncertain times. As we have already indicated around the table, there are some positive signs that can't be overlooked. Certain... | 922 |
fomc | 2,001 | Governor Gramlich. | 4 |
fomc | 2,001 | Thank you, Mr. Chairman. An important theme at our last meeting was uncertainty. We were meeting reasonably close to September 11th and it was still hard to sort out the data. It's easier to do the sorting now. To paraphrase Murphy's Law, almost everything that could go down, did. It's pretty hard to find sources of st... | 944 |
fomc | 2,001 | Governor Meyer. | 3 |
fomc | 2,001 | Thank you, Mr. Chairman. Relative to the current Greenbook forecast, I believe that there are still asymmetric downside risks to the first half of next year but that the risks are more balanced after that time. Because of the near-term downside risks, I view the alternative scenario of still weaker consumer spending as... | 1,186 |
fomc | 2,001 | To say the least! | 5 |
fomc | 2,001 | Perhaps, I muse again, we could do that by being unusually transparent-that is, by informing markets that we view the economy as weaker than they appear to be assuming and that as a result the federal funds rate is less likely to rise as soon or as aggressively as they expect. As I said though, I am just musing here--I... | 88 |
fomc | 2,001 | You're on, Governor Kelley. | 6 |
fomc | 2,001 | I really should pass at this point! Thank you, Mr. Chairman. At the time of our last meeting, the economic horizon already appeared dark, but there was little hard data yet available to judge the severity of unfolding events. Since then we have gotten considerable information that indicates that we have on hand a steep... | 499 |
fomc | 2,001 | Thank you very much. We now turn to Don Kohn. | 13 |
fomc | 2,001 | Thank you, Mr. Chairman. The policy easing you have already undertaken--and in particular the 100 basis point reduction in the federal funds rate in the three weeks after September 11--anticipated a substantial downdraft in economic activity. Nonetheless, with the incoming data indicating that the economy is even weake... | 2,053 |
fomc | 2,001 | Questions for Don? President Hoenig. | 8 |
fomc | 2,001 | Don, doesn't arguing for a 50 basis point cut, on the grounds that the economy may be worse than we thought likely, lead to arguing for an even larger cut because we ought to do all we can now given the limited inflation risks from such an action? You didn't mention making no change in the funds rate, but that would sa... | 153 |
fomc | 2,001 | I think it depends on where you see the central tendency of your forecast. I believe the central tendency among Committee members is for something like the Greenbook forecast--some additional weakness followed by an upturn next year. We're talking about the risks around that central tendency. One could view 50 basis po... | 228 |
fomc | 2,001 | May I ask one other question? With a 50 basis point move, in your opinion are we going to affect the markets' expectations going forward? Will those expectations be completely revised and instead of 75 basis points of ease on the horizon from where we are will they talk about another 75 basis points from where we would... | 76 |
fomc | 2,001 | I think a move of 50 basis points will have a relatively small effect on market expectations. After all, markets have already built in about a two-thirds probability of a 50 basis point cut. I don't put too much weight on the precise measurement of that probability, but you would not be greatly surprising them with suc... | 156 |
fomc | 2,001 | Thank you. | 3 |
fomc | 2,001 | President Minehan. | 4 |
fomc | 2,001 | My question is along the same line. You've drawn--and maybe this is just my perspective--what seems to me to be a fairly stark difference between a cut of 25 versus a cut of 50 basis points. I must say I was troubled by your comment about getting ourselves into a liquidity trap without a 50 basis point cut. I understoo... | 114 |
fomc | 2,001 | I think that's partly a function of how I structured the briefing, in terms of trying to give all the arguments for doing 25 basis points and then all the arguments for doing 50 basis points. It's clearly a matter of considerable judgment. And there are arguments on the 25 basis points side. This may be one of those un... | 218 |
fomc | 2,001 | Let me say a little about the implicit comparison to the Japanese situation. We've been so much more aggressive in a very much shorter period of time than the Bank of Japan was. And our economy is so much more resilient--people use that word over and over--than their economy seems to be in terms of the expectations of ... | 123 |
fomc | 2,001 | Well, you do have 250 basis points before you get down to where the Japanese rates are. So you have a ways to go. And I agree with you that our financial system--our private economy and our financial markets--is much stronger than the Japanese system, which is really what is holding them back. | 63 |
fomc | 2,001 | Right. | 2 |
fomc | 2,001 | On the other hand, our economy is subject to some unusual shocks and we just don't know how businesses and households will be responding to unfolding developments. And there are downside risks. Some in the market see a bottom to the federal funds rate at 1-1/2 percent. So, the rate is approaching that level. It may be ... | 208 |
fomc | 2,001 | I don't put that out of the bounds of possibilities. It's a question of how much control we use in the process of getting there. | 27 |
fomc | 2,001 | Governor Meyer. | 3 |
fomc | 2,001 | I just have a comment on Don's presentation. I thought you were especially effective this time, Don, in making the case for both a 1/4 point move and a 1/2 point move. Indeed, it was a bit of a roller coaster ride for me. I felt myself being swayed first in one direction and then whipsawed back in the other direction. ... | 92 |
fomc | 2,001 | Any further questions for Don? If not, let me proceed. This is a particularly difficult period and I want to start off with a few important issues. The first is that we keep forecasting stabilization but there has been no evidence of it anywhere. We go from one Greenbook to the next with a projection of rising economic... | 1,528 |
fomc | 2,001 | May I ask you a question? | 7 |
fomc | 2,001 | Sure. | 2 |
fomc | 2,001 | I would appreciate your opinion on this. By going with a 50 basis point change, are we likely to foster expectations, not just in financial markets but in the economy more generally, that we will do at least another 25 basis points and will that induce people to hold back because they anticipate further easing? | 62 |
fomc | 2,001 | Yes. I think the expectation that we will do another 25 basis points will be built into the market. I'm not sure that's all bad. I very much suspect, in terms of the way Don put it, that we already have a goodly part of that further easing baked into the market. If we were to go 75 basis points, I would really be conce... | 170 |
fomc | 2,001 | Mr. Chairman, I support your recommendation, probably with the usual enthusiasm of the recently converted, because I entered the weekend with a view that we ought to ease by 25 basis points and over the course of the weekend changed my opinion. Somewhat symbolically I have a pond behind my house in Westchester County a... | 178 |
fomc | 2,001 | Wow! | 2 |
fomc | 2,001 | I second that. | 4 |
fomc | 2,001 | Let me respond to the question that Tom Hoenig raised on the market reaction. If we ease 50 basis points, the market will assume that we will ease at least 25 basis points more. If we ease 25 basis points, the market will make the same assumption but will be confused, I think, about whether we are slowing down just for... | 184 |
fomc | 2,001 | President Parry. | 4 |
fomc | 2,001 | Mr. Chairman, I agree with your preference for a 50 basis point cut in the funds rate. For me the downside risks to the outlook are sizable as illustrated by emerging data, which keep signaling lower and lower forecasts for real GDP growth. Also, as noted in the Bluebook and commented on by Governor Meyer and by you, a... | 107 |
fomc | 2,001 | Governor Gramlich. | 4 |
fomc | 2,001 | Mr. Chairman, I support your recommendation. The good news in what you said was that you came out with a policy that I support. But the bad news is that you actually scared me a bit more than I was already. Nevertheless, I do support your proposal. Let me also address Tom's question. I've had a little trouble with this... | 232 |
fomc | 2,001 | Governor Ferguson. | 3 |
fomc | 2,001 | Mr. Chairman, I support your recommendation. I support it for the reasons that you gave. | 19 |
fomc | 2,001 | Governor Kelley. | 3 |
fomc | 2,001 | I support your recommendation, Mr. Chairman. | 9 |
fomc | 2,001 | Governor Meyer. | 3 |
fomc | 2,001 | Mr. Chairman, I view the risks relative to the Greenbook baseline as still to the downside in the near term. I believe that's a case for erring on the side of stimulus relative to the baseline, given the asymmetric risks and the relationship between the mean and the mode in the forecast. And I believe that's a case for... | 113 |
fomc | 2,001 | President Broaddus. | 5 |
fomc | 2,001 | I support your recommendation, Mr. Chairman, and I support it strongly. | 15 |
fomc | 2,001 | President Stern. | 3 |
fomc | 2,001 | I support your recommendation, Mr. Chairman, although I think Don did make good arguments for both of the alternatives he described. I am a bit concerned that if the tenor of the economy doesn't change until sometime in the spring, say, we're going to run the risk of either overdoing it or at some point having to disap... | 83 |
fomc | 2,001 | President Santomero. | 5 |
fomc | 2,001 | I'm sufficiently uncertain about the timing and the strength of the forecasted recovery that I support a cut of 50 basis points. I do worry a little about endogenizing expectations regarding what we'll do next and about how weak the economy really is. Having said that, I support the recommendation. | 58 |
fomc | 2,001 | President Poole. | 4 |
fomc | 2,001 | Mr. Chairman, I can support the recommendation, although I certainly came into this meeting favoring a move of 25 basis points. The way I see the issue is as follows. As you certainly have said on many occasions--and I have said the same thing--we believe that the U.S. economy has essentially undiminished long-run pros... | 420 |
fomc | 2,001 | Let me just comment on that. First of all, if we seriously believed the time horizon was five years, then I think making a statement that the long-term prospects are optimistic is in any meaningful sense just wrong. When I talk about it, I'm thinking in terms of two years or something in that range. If in fact our comm... | 243 |
fomc | 2,001 | I appreciate your comment on that. My belief--conviction would be too strong a word here--is that we will go through an adjustment, which when we look back at this period sometime in the future, will be regarded as a cyclical adjustment and not a change in the secular outlook for the economy. I think we will be pulling... | 247 |
fomc | 2,001 | But, remember, we have revised down the forecast since those earlier cuts. | 15 |
fomc | 2,001 | I understand. | 3 |
fomc | 2,001 | It's not as though the forecast remained unchanged from the immediate post-September 11th period. If it had, we would be in far better shape now. The outlook has deteriorated. That's the problem. | 42 |
fomc | 2,001 | At any rate, where I come out is that I'm concerned about doing 50 basis points now and about the process that I think we are getting into. I'm not going to dissent; that's not my point. I'm just indicating the reasons underlying my preference for 25 basis points. The likelihood is that we will have more weak economic ... | 107 |
fomc | 2,001 | President Jordan. | 3 |
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