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fomc | 2,002 | President Santomero. | 5 |
fomc | 2,002 | Thank you, Mr. Chairman. I'll report on developments in our District, but my comments will be less colorful! Conditions in the Third District have deteriorated somewhat since our last meeting on September 24. Indicators suggest that the pause we saw in the region's manufacturing sector this summer has worsened. The gen... | 1,074 |
fomc | 2,002 | President Stern. | 3 |
fomc | 2,002 | Let me start with recent changes in District economic conditions, which generally have been modest--and not all of them have been negative. The housing sector continues to be a very bright spot, and even homes priced at the upper end of the market seem to be continuing to move fairly rapidly. Labor markets are steady, ... | 449 |
fomc | 2,002 | President Poole. | 4 |
fomc | 2,002 | Thank you, Mr. Chairman. My Wal-Mart contact tells me that Wal-Mart's expectations for sales growth have been revised downward. He's now expecting sales to grow at the low end of the 2 to 4 percent range. Growth in same-store sales for stores open a year or more came in at 3 percent for September, which was particularl... | 1,590 |
fomc | 2,002 | President McTeer. | 5 |
fomc | 2,002 | I want to update a little story that I told you a meeting or two ago; I've been wondering since Jerry Jordan spoke if this had any relevance to his comments. I had mentioned that several maquiladoras along the Tex-Mex border on the Mexican side had left to go to China to take advantage of lower wages there than in Mexi... | 964 |
fomc | 2,002 | President Hoenig. | 4 |
fomc | 2,002 | Mr. Chairman, the Tenth District economy has shown signs of slowing since the last meeting. But most of our business contacts still remain relatively optimistic about the future. Job growth has been slow, and layoff announcements have picked up, after subsiding through late summer. Reflecting the weak labor market and ... | 958 |
fomc | 2,002 | Shall we break for coffee? | 7 |
fomc | 2,002 | President Guynn. | 4 |
fomc | 2,002 | Economic activity in our Southeast region slowed further in early fall. Despite the cutesy signs we've all seen in some merchants' windows such as "we hear we're in a period of slow growth but we've decided not to participate"--or some version of that--our area is not showing its typical, faster bounceback from recessi... | 1,308 |
fomc | 2,002 | Governor Kohn. | 4 |
fomc | 2,002 | Thank you, Mr. Chairman. In our discussions and announcements we have been counting on policy accommodation and elevated productivity growth to boost the rate of economic expansion and over time to begin to close the output gap. The logic is impeccable, but it's not happening. Recent data confirm the sour anecdotes abo... | 1,074 |
fomc | 2,002 | The Chair grants you an indulgence! [Laughter] Vice Chair. | 15 |
fomc | 2,002 | The Second District economy has shown some signs of weakening since the last report, but labor market conditions and prices have remained fairly stable. Retailers report that sales weakened in October despite a slight weather-related pickup in the second half of the month. Inventories are down from a year ago, but they... | 346 |
fomc | 2,002 | They don't want to share revenues! [Laughter] | 11 |
fomc | 2,002 | No, the revenues come from here to there. | 10 |
fomc | 2,002 | That's a little clearer. | 5 |
fomc | 2,002 | It's called revenue sharing. It's a euphemism. At the national level, we at the New York Reserve Bank think that the economic outlook remains uncertain, to put it mildly, with very considerable near-term downside risk. Our forecast has growth of less than 2 percent in the fourth quarter, and we believe that a reasonabl... | 303 |
fomc | 2,002 | Governor Bies. | 4 |
fomc | 2,002 | I agree with many of the comments and remarks that have already been made. The expansion appears to be losing momentum and slowing, but it is still moving ahead. During the last couple of months, manufacturing activity, new orders, auto sales, and general retail sales have slowed from their prior pace. And capital spen... | 440 |
fomc | 2,002 | Governor Ferguson. | 3 |
fomc | 2,002 | Thank you, Mr. Chairman. A number of people have already discussed the weakness of the incoming data, the step-down in growth from H1 to H2 and the fact that forecasters have marked down the near-term and intermediate-term outlooks. So I'll not attempt to elaborate on those points. Rather, I'd like to focus my few minu... | 995 |
fomc | 2,002 | So to speak! Governor Gramlich. | 8 |
fomc | 2,002 | Thank you, Mr. Chairman. I won't belabor the evidence of present day weakness, but let me look ahead and ask what I think is an important question. It is, What is going to drive the economy? In the late 1990s it was investment; more recently it has been consumption and housing. What's next? I can't find much. Consumpti... | 1,141 |
fomc | 2,002 | Governor Olson. | 3 |
fomc | 2,002 | Let me make two general points. First, in conversations with bankers I surveyed over the past week, almost everything I picked up anecdotally supports the update that Dave Stockton gave us. Second, I would say that the flavor of those anecdotes was along the lines that Cathy Minehan, among others, described very well. ... | 803 |
fomc | 2,002 | May I just ask a quick technical question? What is the incentive, given the vote yesterday, for the President to sign such a bill? | 28 |
fomc | 2,002 | I think it's so the Republicans will then be able to move on and focus on tax policy--that is, if he is reasonably satisfied with the dollar amounts in the bill. That would be my guess, that there will be some incentive to get past it for the purpose of moving on with their agenda. When we talked about revenue sharing ... | 243 |
fomc | 2,002 | Governor Bernanke. | 4 |
fomc | 2,002 | Thank you, Mr. Chairman. I'd like to focus on a simple arithmetic implication of the unusual productivity growth that we've been observing, which is that it creates a wedge between the rate of output growth and the rate of input growth. As a result, we have a situation currently in which the recovery, measured in terms... | 714 |
fomc | 2,002 | I love this econometric language! Mr. Reinhart. | 12 |
fomc | 2,002 | 2 Thank you, Mr. Chairman. I will be referring to the materials that were distributed to you during the coffee break. As has been true at the past few Committee meetings and as shown in the top right-hand panel of your first exhibit, market participants expect the federal funds rate to turn a bit lower before moving up... | 1,740 |
fomc | 2,002 | Questions for Vincent? | 4 |
fomc | 2,002 | I'm not necessarily in favor of this position, but I guess I was a little put off or confused by your dismissal of a 25 basis point move. Isn't it possible, in light of the way the Committee has used 25 basis points in the past, that the markets would take that as an indication--particularly with a downside risk statem... | 78 |
fomc | 2,002 | As I stated, there are two roles for the balance of risks statement. One is as an indication on the course of the economy, and the other is an indication of the likely prospects for policy over the foreseeable future. To the extent that markets focus on the latter and see the risks tilted toward weakness as raising the... | 104 |
fomc | 2,002 | The macroeconomic impact can't be much different. | 9 |
fomc | 2,002 | From a macro standpoint, if the funds rate is 50 basis points lower by December 10, it's not going to make a whole lot of difference if it got there in one step or in two. But there is the first role for the balance of risks statement that I mentioned as well, which a few members have emphasized over the last couple of... | 111 |
fomc | 2,002 | Probably nothing different than when we didn't lower rates but said that the risks were unevenly balanced toward the downside. | 22 |
fomc | 2,002 | That's what the policy discussion is going to be about. | 11 |
fomc | 2,002 | Right. | 2 |
fomc | 2,002 | Further questions for Vincent? If not, let me get started on comments. To repeat some of the issues that I've raised with the Committee in the past, the ability of this economy to withstand so many shocks time after time after time has been extraordinarily impressive. The necessary implication of that performance in my... | 2,524 |
fomc | 2,002 | Thank you, Mr. Chairman. Not surprisingly, I do think that you're right, but let me explain why. It seems to me that it's very clear from the discussion around the table that we need to take out insurance against the downside risks in the Greenbook forecast and in everybody else's forecast that I heard. When one is tak... | 532 |
fomc | 2,002 | President Jordan. | 3 |
fomc | 2,002 | Thank you. I think the Vice Chairman's description of the virtues of 50 basis points and balanced risks versus 25 and the risks tilted toward weakness is correct, and I won't repeat that. But to me the issue is more one of a change now versus no change. And in the spirit of what Gary Stern said earlier about what one t... | 263 |
fomc | 2,002 | President Hoenig. | 4 |
fomc | 2,002 | Mr. Chairman, given the uncertainty in the economy, which you described in your remarks, I would accept and in fact would support a move of 50 basis points if we are going to move at all. And since we are dealing with the issue of uncertainty, I think having a balanced risk statement is a prudent way to do it. So I sup... | 76 |
fomc | 2,002 | Governor Ferguson. | 3 |
fomc | 2,002 | Thank you, Mr. Chairman. I also support you. Let me give my reasons. First, given what we've seen in terms of the incoming data, the marking down of forecasts, et cetera, it's important for us to maintain the same degree of stimulus that we had before at our last meeting. If we look at and visually adjust exhibit 2 in ... | 394 |
fomc | 2,002 | Governor Gramlich. | 4 |
fomc | 2,002 | Thank you, Mr. Chairman. I support a cut of 50 basis points. I'm delighted to support 50. I, frankly, would have a modest preference to retain the asymmetry in the risk statement because I think to go 50 and move to balance makes us look too confident that we understand the situation. It seems as though we're saying ab... | 151 |
fomc | 2,002 | Governor Kohn. | 4 |
fomc | 2,002 | Thank you, Mr. Chairman. I support both parts of your recommendation. As for the 50 basis point cut, I think we need it. Recent data are sufficiently worrisome and the most likely forecast is sufficiently tepid to justify 50 basis points. And I do think it would feed through to long-term interest rates. Looking at Vinc... | 362 |
fomc | 2,002 | President Minehan. | 4 |
fomc | 2,002 | At the last meeting or maybe even at the last two meetings, I could have gone with a 25 basis point reduction in rates and called it insurance. So I'm clearly in the camp of reducing rates. And given the incoming data, 50 basis points probably is a better insurance policy than 25. I find this discussion of the balance ... | 327 |
fomc | 2,002 | President Broaddus. | 5 |
fomc | 2,002 | Mr. Chairman, I think we face a different situation from the one we were facing a year or so ago when I made the comment that you referred to. So, if I had my druthers, I personally would continue to be patient a little while longer than Jack Guynn and Tom Hoenig suggested. But if we ease--and I have thought through th... | 323 |
fomc | 2,002 | President Parry. | 4 |
fomc | 2,002 | Mr. Chairman, to me it makes a lot of sense to go with the 50 basis point cut, one that is large enough to have a noticeable effect. My main concern about this large cut is that it might send the message that the economy is weaker than we currently think. But by adopting a risk assessment that is balanced I believe we ... | 83 |
fomc | 2,002 | President Stern. | 3 |
fomc | 2,002 | Mr. Chairman, I support the 50 basis point reduction in the funds rate target. I think there's a good chance that it's the right thing to do. But even if it's not, as you already suggested, the risks of taking this action seem low basically because of the situation in which we could find ourselves with regard to produc... | 118 |
fomc | 2,002 | President Poole. | 4 |
fomc | 2,002 | Mr. Chairman, I support the recommendation to cut the funds rate by 50 basis points. I agree with the argument that 25 basis points would lead to market expectations that another 25 is coming, and I think it's much better to act decisively. Yes, it's probably true that some people will say in reaction to 50, "Oh my God... | 404 |
fomc | 2,002 | President Moskow. | 4 |
fomc | 2,002 | Mr. Chairman, I agree with both parts of your recommendation. I believe it is a good insurance policy against downside risks. On the risk statement, it's a close call, but on balance I think it is better to go the way you suggested in order to reduce the unintended negative consequences if we were to keep the tilt towa... | 197 |
fomc | 2,002 | President Santomero. | 5 |
fomc | 2,002 | I support your recommendation. I see the two parts of the recommendation as essentially and necessarily together. I'd feel a little less comfortable with the notion of 50 basis points and the risks toward weakness because I think the market would respond as several people have suggested. The alternative of a slightly m... | 116 |
fomc | 2,002 | There's a difference? [Laughter.] | 8 |
fomc | 2,002 | In any case, I think it clearly is necessary that we respond to the economic forces as we see them. So I can indeed support the recommendation. | 30 |
fomc | 2,002 | President Guynn. | 4 |
fomc | 2,002 | Mr. Chairman, I can support the recommendation. I would be more than a little uncomfortable with 50 basis points and the continuation of an asymmetric risk assessment. I hope we can use the press statement to suggest that we know how to look beyond the next couple of data releases and that we see a better economy down ... | 208 |
fomc | 2,002 | Governor Bies. | 4 |
fomc | 2,002 | Mr. Chairman, I support the recommendation to go down 50 basis points on the funds rate. I think we need to show that we are ahead at this point in the economy. I find it a little harder on the balance of risks statement. One of the reasons--using some of the words that Vincent put in his handout--is that we talk about... | 193 |
fomc | 2,002 | Governor Olson. | 3 |
fomc | 2,002 | When I began reviewing the Greenbook information, I had a reaction to it that I didn't expect. As I was reading through it, I heard the theme that the current news is disappointing, but the economy was still seen as poised for accelerating growth at some point in the future. And it struck me that I had been reading tha... | 232 |
fomc | 2,002 | Governor Bernanke. | 4 |
fomc | 2,002 | Mr. Chairman, I also support both parts of the recommendation. I think 50 basis points is just right. I would be less concerned about retaining the bias toward weakness on the grounds that the market survey data suggest that there's essentially a universal expectation that we will retain that bias even when people anti... | 102 |
fomc | 2,002 | President McTeer. | 5 |
fomc | 2,002 | I agree enthusiastically with your recommendation of 50 basis points. I think the way the bias is usually interpreted the more honest thing to do is to keep the bias in a downward direction. But I agree with Governor Bies that, if we could make it clear that we're looking some distance out in the future, then it would ... | 95 |
fomc | 2,002 | Okay. Would the Secretary read the language? | 9 |
fomc | 2,002 | This language is on page 12 of 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 with... | 127 |
fomc | 2,002 | Call the roll. | 4 |
fomc | 2,002 | Chairman Greenspan Yes Vice Chairman McDonough Yes Governor Bernanke Yes Governor Bies Yes Governor Ferguson Yes Governor Gramlich Yes President Jordan Yes Governor Kohn Yes President McTeer Yes Governor Olson Yes President Santomero Yes President Stern Yes | 49 |
fomc | 2,002 | I'd like to take a short recess and ask the members of the Board of Governors to gather in my office to act on the requests on the discount rate. In the interim we can distribute the draft press statement and ask everybody to take a look at it. [Recess] | 55 |
fomc | 2,002 | The Board members need some time to read the statement. Questions? President Jordan. | 16 |
fomc | 2,002 | The first paragraph mentions the discount rate action but without identifying the Reserve Banks whose pending actions have been approved. Is that going to be added? | 28 |
fomc | 2,002 | That will be added. There are two Banks requesting a 50 basis point reduction, New York and Dallas. The standard procedure, as you all know, is that others come in later in the day or the following day. There is a question, in fact, given the introduction of our new procedures early next year, as to whether we should b... | 158 |
fomc | 2,002 | Well, it might be more efficient to have this discussion over lunch. | 14 |
fomc | 2,002 | Yes, that strikes me as a far better approach than to continue without lunch. | 16 |
fomc | 2,002 | That will be an FOMC discussion, however. | 11 |
fomc | 2,002 | So we don't close the meeting. | 7 |
fomc | 2,002 | We don't close the meeting. [Brief recess] | 10 |
fomc | 2,002 | Dino. | 3 |
fomc | 2,002 | Thank you, Mr. Chairman. Recently, Vincent Reinhart and I sent a memo to the Committee on the SOMA alternative assets study. Before we turn to the main part of today's discussion, let me just remind you that in March we sought guidance from the Committee on prioritizing resources for the continuation of our work on thi... | 407 |
fomc | 2,002 | Thank you. The report distributed to the Committee on October 8 follows up on the January 2001 SOMA study to explore several issues. These include the structure of auctions of term discount window advances and their coordination with Desk operations; the perspective of bank supervisors on the risks posed by an auction ... | 1,027 |
fomc | 2,002 | Let me conclude the staff portion of these remarks by explaining what Dino and I hope to get from the Committee this afternoon. Basically, we'd like your advice on what portions of five different items you want us to continue to work on and what time frame, if you do want us to work on them, you think would be reasonab... | 414 |
fomc | 2,002 | President Parry. | 4 |
fomc | 2,002 | Mr. Chairman, starting out with the fifth point, it seems to me that it is a very good staff study, and I hope that it will be released at some point for public comment and discussion. As for the options suggested for additional study, I favor consideration of the purchase of Ginnie Mae securities. Where such fully fed... | 167 |
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