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fomc | 2,002 | President Santomero. | 5 |
fomc | 2,002 | Thank you, Mr. Chairman. Data received since our last meeting suggest that the recovery is proceeding at a moderate pace in the Third District, which is consistent with our forecast. The manufacturing sector continues to improve. In June our Business Outlook Survey index of general activity posted its sixth positive re... | 1,196 |
fomc | 2,002 | President Hoenig. | 4 |
fomc | 2,002 | Thank you, Mr. Chairman. The Tenth District's economy has continued to show signs of improvement over the past several weeks since our last meeting, although some sectors obviously remain weak and businesses are still acting in a cautious manner. Prospects for District manufacturers actually have improved further thoug... | 751 |
fomc | 2,002 | President Jordan. | 3 |
fomc | 2,002 | Thank you, Mr. Chairman. First, I want to make a comment about state and local finances, an issue that several people have mentioned. I think that is going to be a concern for some time. The census numbers for the State of Ohio indicate that during the decade of the 1990s--between the 1990 census and the 2000 census--t... | 1,439 |
fomc | 2,002 | President Broaddus. | 5 |
fomc | 2,002 | Thank you, Mr. Chairman. Frequently at recent meetings I've described our District's economic picture as mixed. The information we've received since the last meeting of this Committee in early May I would describe as beyond mixed. I've been looking for another word--"dual" doesn't quite do it--and maybe "schizophrenic"... | 78 |
fomc | 2,002 | How about "mixed up"? [Laughter] | 10 |
fomc | 2,002 | Yes, "mixed up" is a good phrase. In any case, what I mean by that is that there are strong negatives and strong positives and not a lot of middle ground. The comments we're hearing on the positive side are similar to those a number of other people around the table have mentioned. Manufacturing looks better and that ha... | 987 |
fomc | 2,002 | I hope the odds are not 70 to 1! [Laughter] | 16 |
fomc | 2,002 | But my point is that we can't rule it out. | 11 |
fomc | 2,002 | Yes, even at 70 to 1, I guess one can't rule it out. It happens once in seventy times. | 25 |
fomc | 2,002 | Twice in 140 times! | 7 |
fomc | 2,002 | President Stern. | 3 |
fomc | 2,002 | Thank you, Mr. Chairman. Beginning with the District economy, we have under way a gradual but what I think is by now a broadly based improvement in economic activity. Residential construction and sales, which have been a continuous bright spot, remain a distinct bright spot pretty much throughout the District. Consumer... | 498 |
fomc | 2,002 | First Vice President Barron. | 6 |
fomc | 2,002 | Thank you, Mr. Chairman. Economic conditions in the Southeast have remained subdued since the last FOMC meeting. Although we are witnessing some improvement in manufacturing and especially in the tourism and textile sectors, consumer spending has actually slackened off somewhat. With respect to tourism, Florida seems t... | 1,112 |
fomc | 2,002 | President McTeer. | 5 |
fomc | 2,002 | Since our last meeting, we have more evidence that the Eleventh District is still in recovery mode, but data and anecdotes to date point to a disappointingly weak and lackluster rebound. Job growth from February through May has been close to zero, and the Texas unemployment rate has inched up to just over 6 percent. In... | 876 |
fomc | 2,002 | President Poole. | 4 |
fomc | 2,002 | Thank you, Mr. Chairman. The contacts that I talk to emphasize over and over again that the picture has not changed very much from the time of our last meeting. In fact, as I reflect on the situation, I can't remember an intermeeting period in which less has changed in terms of the overall outlook for the real economy,... | 614 |
fomc | 2,002 | Governor Bies. | 4 |
fomc | 2,002 | The discussion that we've been hearing today is consistent with the Beige Book summary that characterizes economic growth as modest and uneven--or schizophrenic, as we said earlier. From late 2001 until the last FOMC meeting, most forecasters had been revising growth estimates upward. Since the last meeting, we're seei... | 296 |
fomc | 2,002 | Vice Chair. | 3 |
fomc | 2,002 | Thank you, Mr. Chairman. The Second District's economic performance has been mixed, as we've been hearing is the case in most parts of the country. There are some signs of increased price pressures in manufacturing and real estate; but aside from shelter costs, finished goods inflation has remained stable and low. Reta... | 385 |
fomc | 2,002 | I'm not sure everybody around here would know who Lefty Grove is! [Laughter] | 18 |
fomc | 2,002 | He's the greatest left-handed pitcher in baseball history. Thirty-one wins and six losses in his best year, with a lifetime earned-run average of about 2.53? | 34 |
fomc | 2,002 | Is that a question mark at the end of that statement? [Laughter] | 16 |
fomc | 2,002 | He was a very good pitcher. The point I wish to make is that we would be ill advised now to be preparing the market for something that I don't think the market needs to be prepared for. Our balance of risks statement says that we think the risks are balanced. If we were to say that we think there is a greater risk of i... | 940 |
fomc | 2,002 | Governor Gramlich. | 4 |
fomc | 2,002 | Thank you, Mr. Chairman. The latest J.P. Morgan newsletter starts off: "Global equity markets continue to slide this week, government bond yields are falling, and the spread on emerging-market debt is widening. Such changes often signal that an economic slowdown lies ahead. However, economic indicators still point upwa... | 829 |
fomc | 2,002 | Governor Ferguson. | 3 |
fomc | 2,002 | Thank you, Mr. Chairman. My view of the near-term indicators is that they do indeed, as others have already indicated, paint an economy that is stable--certainly not contracting--but not yet growing at trend. For example, the initial claims data have come down from their recent artificially elevated level, but they rem... | 835 |
fomc | 2,002 | Governor Olson. | 3 |
fomc | 2,002 | We've had a couple of comments regarding the impact of public policy, and I think Governor Gramlich summarized it pretty well. In the course of this past year we have had a stimulative tax and spending policy offset--and significantly, I think--by a loss of fiscal discipline, which was an issue we discussed at the last... | 423 |
fomc | 2,002 | Thank you very much. I think we can break for coffee now. | 14 |
fomc | 2,002 | Mr. Kohn. | 5 |
fomc | 2,002 | Thank you, Mr. Chairman. The Committee has noted in its last few announcements that the current stance of policy is accommodative, in large part to signal that it appreciated that the current level of the federal funds rate is likely to be inconsistent over time with its long-term goals for price stability and maximum ... | 1,715 |
fomc | 2,002 | Thank you. Questions for Don? President Parry. | 11 |
fomc | 2,002 | First of all, I think the perfect foresight exercises, both in the Bluebook and also in the memo by Bob Tetlow were very helpful. I have a couple of questions with regard to those exercises. Page 7 of the Bluebook, about the seventh or eighth line down, talks about the objective function as minimizing the squared devia... | 148 |
fomc | 2,002 | I think they were about the same, but maybe Vince can give you a more detailed explanation. | 19 |
fomc | 2,002 | You are right; Bob's memo highlighted that it was unemployment relative to the natural rate. | 18 |
fomc | 2,002 | So did you run a different model simulation? | 9 |
fomc | 2,002 | No, actually we ran the same one. | 9 |
fomc | 2,002 | Oh, okay. | 4 |
fomc | 2,002 | However, going forward in the forecast, Okun's law relates the two, so it doesn't make a difference. | 23 |
fomc | 2,002 | But the relationship--I think we ought to talk about that. In other words, you didn't put it in the right terms. This should be-- | 30 |
fomc | 2,002 | Unemployment relative to the natural rate. | 8 |
fomc | 2,002 | That's what I thought the answer was. Thank you. | 11 |
fomc | 2,002 | I do think that in the staff's assessment there isn't much difference going forward because in the staff forecast the NAIRU is 51/4 percent. | 31 |
fomc | 2,002 | Right, but in the most recent period it's different. My second point is that you talk about the small penalty associated with changes in the funds rate. In Tetlow's work I thought it had almost an equal weight. And that's pretty important in terms of the objective function. Unless you used a different penalty, I don't ... | 75 |
fomc | 2,002 | No, the Bluebook simulation is exactly the same as the one Bob presented. | 16 |
fomc | 2,002 | So it gives a heavy weight to smoothing changes in the funds rate; that's the way he characterized it. | 21 |
fomc | 2,002 | The penalty is our dirty little secret. | 8 |
fomc | 2,002 | You got it! | 4 |
fomc | 2,002 | It isn't obvious why in a perfect foresight simulation we would necessarily impose that the Committee cared about gradualism in setting rates. | 25 |
fomc | 2,002 | Right. | 2 |
fomc | 2,002 | We do it for a couple of reasons. One is the characterization of uncertainty. Second, the model has a property that it gives us a small contemporaneous effect of monetary policy. That is, if you change the funds rate this quarter, it will actually influence output in this quarter. That doesn't seem credible. So gradual... | 97 |
fomc | 2,002 | It's all relative to the other. | 7 |
fomc | 2,002 | Right. | 2 |
fomc | 2,002 | One final question. You referred to the growth rate of potential as 31/4 percent after 2003. Tetlow used 31/2 percent, and in fact it builds to above 31/2 percent after that. Did you use a different simulation there? | 55 |
fomc | 2,002 | We were using the same simulations. Now, Bob's memo was written a week before the Greenbook was finalized. So, it must reflect either a change between the times the two exercises were done or a different rounding convention. | 45 |
fomc | 2,002 | Okay, thanks. | 4 |
fomc | 2,002 | I don't think there were any changes in the model itself. | 12 |
fomc | 2,002 | President Poole. | 4 |
fomc | 2,002 | I have a comment on page 14 of the Bluebook--the box that discusses the market reaction to policy surprises. I think there's a lot more that could be done in that exercise. In particular, I think there's a better way of doing table 1 versus table 2. Instead of partitioning the data by date, I'd use the size of the poli... | 124 |
fomc | 2,002 | In fact, I think we did something similar to that with a different range. This analysis is basically a work in progress. I would say that we were influenced by the reaction to the January 3, 2001, action, which was certainly not in the 5 basis points or less cell. | 61 |
fomc | 2,002 | That's absolutely right. That's why I'm suggesting that you partition these observations. I used 5 basis points because our research indicates that that's about the ambient noise in the federal funds futures market. | 37 |
fomc | 2,002 | We have ongoing research that involves looking at the different measures of expectations. And it does turn out, whether you use the federal funds futures, the Eurodollar, or a term structure that you can tweak these numbers a little bit. | 47 |
fomc | 2,002 | Further questions? If not, let me get started. I've been particularly impressed, and others have as well, by how this economy has withstood the extraordinary impact of the dual shocks of a major collapse in equity asset values and the tragic events of September 11. I think it's important, however, not to perceive the e... | 3,131 |
fomc | 2,002 | We had a panel on that. | 7 |
fomc | 2,002 | It's fairly evident that there is a secular increase in the value of homes relative to the value of other assets. The consequence is that the extraction of funds from home equity values is a much more important source of consumption expenditures than earlier. Previously, consumers were not able to extract cash easily o... | 900 |
fomc | 2,002 | Right. | 2 |
fomc | 2,002 | In sum, there are serious problems out there. We don't know how to evaluate them. We're still waiting for the next terrorist attack, which at some point is inevitable. We have no idea where it will come or what the consequences will be, but that something will happen somehow has to be factored into our forecasts. It's ... | 621 |
fomc | 2,002 | Thank you, Mr. Chairman. I concur with your recommendation fully. | 14 |
fomc | 2,002 | Governor Ferguson. | 3 |
fomc | 2,002 | I also concur with your recommendation. | 7 |
fomc | 2,002 | President Poole. | 4 |
fomc | 2,002 | I support the recommendation. | 5 |
fomc | 2,002 | President Moskow. | 4 |
fomc | 2,002 | I support the recommendation, Mr. Chairman. | 9 |
fomc | 2,002 | President Stern. | 3 |
fomc | 2,002 | I also support the recommendation. | 6 |
fomc | 2,002 | President Parry. | 4 |
fomc | 2,002 | I support it as well. | 6 |
fomc | 2,002 | I do, too. | 5 |
fomc | 2,002 | Governor Bies. | 4 |
fomc | 2,002 | I support it. | 4 |
fomc | 2,002 | I don't want to inhibit anybody from talking. We have plenty of time. President Minehan. | 19 |
fomc | 2,002 | I support the recommendation as well. I must say I was drawn to the way Roger Ferguson described the situation--as an "uncomfortable balance of risks." I feel very much that way also. | 39 |
fomc | 2,002 | I think that's an accurate way to characterize it, clearly. President Broaddus. | 17 |
fomc | 2,002 | I support your recommendation. | 5 |
fomc | 2,002 | President Santomero. | 5 |
fomc | 2,002 | I support the recommendation. | 5 |
fomc | 2,002 | President Hoenig. | 4 |
fomc | 2,002 | I support your recommendation. I do want to make one comment. I agree with you that we have a lot of credibility in the market. But I think a good part of that credibility has been achieved because we have been open with the market. And what you're saying today is that we would have a balanced risk statement but we're ... | 81 |
fomc | 2,002 | Well, I think they are balanced at a 13/4 percent federal funds rate. | 18 |
fomc | 2,002 | My concern is, given where we are, that we're sending the message that the economy is going to grow and yet we're holding the funds rate down at a very low level. I think that deserves some explanation. That's my point going forward. | 48 |
fomc | 2,002 | I would just say that I think globalization has altered the situation to an extent. It does not eliminate the fact that we will have to move. If protectionism really starts to become a problem here, it could turn the globalization issue to our disadvantage. My point is that we don't have to be anxiously moving ahead of... | 94 |
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