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fomc | 2,003 | President Minehan. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. I thought Dave and Karen did a fabulous job, both in the written material and in the presentation, of covering in effect the entire waterfront of risks and possibilities to consider as we sit here and try to determine how this situation is going to turn out. I know I was impressed by the comple... | 263 |
fomc | 2,003 | Well, you're right that I'm not going to concede that point immediately. [Laughter] In fact, one of the things that we did in preparation for this forecast was to look at some of what we call good case and bad case scenarios. As you know, our forecast is not based on all the good things that would necessarily follow fr... | 526 |
fomc | 2,003 | Thank you. | 3 |
fomc | 2,003 | President Moskow. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. I had a question for David also on the risks to the forecast. I notice that in your forecast the personal saving rate increases and then flattens out during 2004. Historically, the saving rate is a couple of percentage points higher than that rate. I had two questions on this. First, is that wh... | 105 |
fomc | 2,003 | Our best guess is that we still have a little way to go on the saving rate, but not a lot further, in response to the deterioration that has occurred in household balance sheets. We have models that put the saving rate anywhere between 5 and 7 percent in the long run, but I think somewhere around 6 percent or just nort... | 370 |
fomc | 2,003 | Thank you. | 3 |
fomc | 2,003 | President Poole. | 4 |
fomc | 2,003 | I have a brief comment on that. There are a lot of news reports about companies canceling their contributions to 401(k) plans as an economy move. That might lead individuals to reduce their contributions, which would tend to bring the saving rate down. I don't know how extensive that is, but we certainly hear reports t... | 74 |
fomc | 2,003 | We've heard those reports as well. I'm not quite sure how that would net out or quantitatively how significant it would be at this point. | 28 |
fomc | 2,003 | If nobody else has questions or comments, who would like to start the discussion? President Broaddus. | 21 |
fomc | 2,003 | Thank you, Mr. Chairman. For a while in January it looked as if activity was strengthening moderately in our region, especially in the manufacturing sector. That made us something of an outlier in the commentary in the Beige Book, but we fell back in line in February. Our monthly index from our survey of the manufactur... | 878 |
fomc | 2,003 | Vice Chair. | 3 |
fomc | 2,003 | Thank you, Mr. Chairman. Our views regarding the Second District, the national economy, and the international economy are all clouded by uncertainties. So rather than sharing our confusion about those three subjects, I'd like to talk about the uncertainty. What we do not know is the degree to which that uncertainty is ... | 604 |
fomc | 2,003 | President Hoenig. | 4 |
fomc | 2,003 | Mr. Chairman, economic activity in the Tenth District, as in other regions, remains basically sluggish, though we have had a few signs of improvement on mixed data since the last meeting. Retail sales have increased only slightly from the disappointing holiday season, and commercial real estate is still mired in a very... | 872 |
fomc | 2,003 | President Guynn. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. As I suspect everybody will note before the morning is over, it has proved particularly difficult to get our arms around what's happening in the economy generally. That's certainly the case more specifically in our own District. The data and the anecdotal evidence are contradictory in some resp... | 1,457 |
fomc | 2,003 | President Parry. | 4 |
fomc | 2,003 | Mr. Chairman, economic expansion in the West remained sluggish in the recent weeks. District consumers reined in spending in February and early March, making profitability a challenge for many retailers. A number of District auto dealers also faced more difficult times as unit sales and profit margins fell. Rising gaso... | 760 |
fomc | 2,003 | President Moskow. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. Economic activity in the Seventh District has softened. Many of our contacts indicate that they saw some signs of improvement beginning around the turn of the year and extending into the first half of February. However, activity has deteriorated abruptly over the past few weeks. Clearly, consum... | 888 |
fomc | 2,003 | President Poole. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. What we hear repeatedly around the District are phrases such as "muddling along," "on hold," and "wait and see." Bank loan demand is flat. It's very difficult to know--I don't think anybody can tell--how much of what we've been observing is a consequence of war fears and how much of it reflects... | 550 |
fomc | 2,003 | President Stern. | 3 |
fomc | 2,003 | Thank you, Mr. Chairman. I would describe the District economy as stable, and I do think that's probably the right term. There doesn't seem to be any appreciable deterioration at this point, but at the same time there's little net growth. Employment for the most part is flat, although at the far western and eastern end... | 693 |
fomc | 2,003 | President Santomero. | 5 |
fomc | 2,003 | Thank you, Mr. Chairman. Since our last meeting, growth in economic activity in the Third District has faltered. At least part of this is due to uncertainty over the timing, duration, and magnitude of the war, as many others have said. It's likely that when this uncertainty is resolved we'll see stronger growth, but ou... | 490 |
fomc | 2,003 | No thanks! | 3 |
fomc | 2,003 | Nevertheless, our retailers tell us that, even before the storm, sales momentum was slowing. Store traffic has been down since January, and merchants generally indicate that consumers are limiting discretionary purchases except for home-related goods. Commercial and residential construction activity has eased, although... | 753 |
fomc | 2,003 | President Minehan. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. For the last couple of meetings I've tempered my remarks about the New England economy with references to a light at the end of the tunnel, however dim. This had been seen in confidence indicators, in a leading index of the Massachusetts economy, and in many anecdotal references. I hesitate to ... | 1,896 |
fomc | 2,003 | Governor Kohn. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. I'm not sure I can follow that gloomy assessment and alleviate it very much. Like others around the table, I've focused on our struggle to sort out the restraining near-term effects of the war concerns from the more fundamental factors affecting of the economy. Unfortunately, the picture became... | 278 |
fomc | 2,003 | I don't think I'm going to mention the weather again! | 11 |
fomc | 2,003 | You folks in Chicago wouldn't even have noticed it if you had had this storm! Seasonally adjusted, it's always spring in Chicago. Very nasty weather along the East Coast had a major effect on the data for employment, production, and sales in February. The rise in energy prices since late last year, reflected in gasolin... | 839 |
fomc | 2,003 | With that we shall adjourn for coffee. | 9 |
fomc | 2,003 | President McTeer. | 5 |
fomc | 2,003 | Thank you, Mr. Chairman. Not much new and significant is going on in the Eleventh District economy. Personal income is growing but not fast enough to raise living standards. Employment finally is growing again but at rates so anemic that it feels like contraction. Other indicators have crossed the threshold into expans... | 1,140 |
fomc | 2,003 | Governor Gramlich. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. After starting the year off strongly, the economy seems to have taken another stumble in February. The list of disappointing economic reports since our last meeting is long: the jobs report, consumer confidence, retail sales, auto production, industrial production, earnings forecasts, state and... | 674 |
fomc | 2,003 | President Pianalto. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. Economic conditions in the Fourth District appear to be broadly consistent with those in the rest of the nation. Two sentences in the Beige Book national summary describe our situation very well--namely that growth in economic activity remained subdued in January and February and that geopoliti... | 1,017 |
fomc | 2,003 | Governor Ferguson. | 3 |
fomc | 2,003 | Thank you, Mr. Chairman. Since the last meeting we have witnessed a striking example of the differences between risk and uncertainty, with the latter being an important factor in the private sector's economic decisionmaking. The economy appeared to have picked up its pace of growth in January and then suffered a setbac... | 648 |
fomc | 2,003 | Governor Olson. | 3 |
fomc | 2,003 | In talking with bankers within the last week or so, I think the vantage points of two in particular were of interest. One indicated that at his bank, one of the largest consumer lenders in the country, the volume and credit quality they have been experiencing recently is consistent with upward pressures on prices and y... | 523 |
fomc | 2,003 | Governor Bies. | 4 |
fomc | 2,003 | I also wanted to talk a little about the financial sector, including banks, and contrast that with what we see happening in the real sector. The Bluebook pointed out that commercial banks in the United States had record earnings in 2002. And they had record earnings in 2001. We had back-to-back years of record earnings... | 965 |
fomc | 2,003 | Governor Bernanke. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. As many have noted, we're currently in a period of maximum uncertainty, with the result that the economy is almost in a state of suspended animation. Until the world situation clarifies, the hurdle rate for investment or any major commitment will be very high, as some of my colleagues have note... | 670 |
fomc | 2,003 | Thank you very much. Mr. Reinhart. | 10 |
fomc | 2,003 | 2 Mr. Chairman, Carol will be distributing some materials that I'll be referring to. With events moving quickly, I thought it best to start with the snapshot in exhibit 1 of market participants' current thinking about the decision you will announce this afternoon. As shown in the top panel, at ten o'clock this morning ... | 1,752 |
fomc | 2,003 | Thank you very much. Questions? If not, let me move forward. Today's discussion around the table pretty much coalesced into significant alternative outcomes. I believe almost everybody would argue that the economy is weak, and indeed I suspect on the basis of the most recent numbers that economic activity has probably ... | 448 |
fomc | 2,003 | Some of our contacts indicated that their production is closer to 1.3 million than to the stated 2.9 million. | 26 |
fomc | 2,003 | The stated 2.9 million figure, as everybody knows, is phony. | 17 |
fomc | 2,003 | The actual number may be a little less than half that stated level. | 14 |
fomc | 2,003 | Yes, but a number of the oil analysts who follow Venezuela fairly closely are saying it's 2 million. Now, if you want to go down and look, we'll both go down and look. | 39 |
fomc | 2,003 | If you go down and look, there could be two openings on the Committee. [Laughter] | 20 |
fomc | 2,003 | You're still trying to figure out ways to improve this place? [Laughter] | 16 |
fomc | 2,003 | There's no uncertainty about the risk of doing that! | 10 |
fomc | 2,003 | In any event, I think the argument that the geopolitical risks are affecting economic activity has a certain credibility, but there is no way to know how much. You can argue that the Iraqi and Venezuelan situations are having a negative effect, but you obviously can't argue that all of the negative effect bearing on cu... | 1,483 |
fomc | 2,003 | Mr. Chairman, I assume that what you are recommending is that we do nothing today, that we have no balance of risk statement, and that we remain very alert to developments. Assuming that's what you are recommending, I'm fully in favor of it. | 50 |
fomc | 2,003 | Governor Ferguson. | 3 |
fomc | 2,003 | I support the combined recommendation of the Chairman and the Vice Chairman. [Laughter] | 17 |
fomc | 2,003 | He merely interpreted what I said! | 7 |
fomc | 2,003 | The recommendation and the interpretation. [Laughter] | 10 |
fomc | 2,003 | That's better. Governor Bies. | 7 |
fomc | 2,003 | I support your recommendation. | 5 |
fomc | 2,003 | President Hoenig. | 4 |
fomc | 2,003 | Well, I support your recommendation, Mr. Chairman. But I have a question for you. Are you planning to say in the press statement that we stand ready to move, or are you just leaving that open? | 43 |
fomc | 2,003 | No, I think what we would want to do essentially is to stipulate that because we're presumably moving from a period of uncertainty to one of risk we are involved in heightened surveillance, which implies that our policy will depend on how the situation unfolds. For example, the stock market is up 20 percent in Europe. ... | 101 |
fomc | 2,003 | Yes, I agree. It wasn't clear to me how you were planning to explain our posture to the public. That answer was helpful. Thank you. | 30 |
fomc | 2,003 | The idea is to have the possibility but not the certainty of a move; otherwise the market will be waiting every morning for us to have a meeting. | 30 |
fomc | 2,003 | Absolutely. | 2 |
fomc | 2,003 | Governor Kohn. | 4 |
fomc | 2,003 | I support your recommendations, Mr. Chairman. I think, as I noted in my comments, that we really don't know enough to say anything. I would also agree with President Hoenig in that I would try to stay away from building up expectations in the market that we are about to do something. Although we may get clarification o... | 108 |
fomc | 2,003 | President Guynn. | 4 |
fomc | 2,003 | Mr. Chairman, I support your recommendation. My staff and I struggled mightily with how we would handle the balance of risks statement. Hats off to the person who first came up with the idea. | 40 |
fomc | 2,003 | It was a combination of the great insights of Governor Kohn and Vincent Reinhart. | 17 |
fomc | 2,003 | Hats off to Don and Vincent. I would also echo Don's comments about the need to be careful that we don't go too far in implying that a move is imminent. Thank you. | 38 |
fomc | 2,003 | Governor Gramlich. | 4 |
fomc | 2,003 | I support the recommendations. I'd like to say three other things. First, I actually buy the Knightian uncertainty analogy and using that as a rationale for deferring the announcement of our judgment on the balance of risks. Second, as Dave pointed out, there is a strong possibility that in fact we're not going to know... | 280 |
fomc | 2,003 | May I interject a comment here? Ned and I had a discussion about this yesterday. We have to be very careful, if we're looking at new techniques, not to get ourselves involved in any pegging of intermediate- or longer-term rates. I say that not because we couldn't make it happen but because the problem of unwinding that... | 237 |
fomc | 2,003 | Mr. Chairman, the present Manager of the System Open Market Account and I, as a previous Manager, are absolutely in agreement with you. We cannot peg an intermediate rate. It would be very, very dangerous to try to do that. | 48 |
fomc | 2,003 | President Pianalto. | 4 |
fomc | 2,003 | I support your recommendation, Mr. Chairman. | 9 |
fomc | 2,003 | President Santomero. | 5 |
fomc | 2,003 | I support your recommendation, Mr. Chairman. | 9 |
fomc | 2,003 | President Parry. | 4 |
fomc | 2,003 | Mr. Chairman, although I think an economic case can be made for easing policy, I support your recommendation. I would also suggest that the idea of having a conference call strikes me as very useful. It may be that a call wouldn't necessarily be scheduled only for the purpose of considering a policy change. If we're go... | 86 |
fomc | 2,003 | Next week will be too soon. We won't know enough in a week. | 15 |
fomc | 2,003 | I'm thinking only in terms of getting updates from the staff about how things are unfolding, not in terms of any consideration of policy action. | 27 |
fomc | 2,003 | Well, what is the Committee's general view on this? I remember that at the time of the October 1987 stock market crash we had daily conference calls for general updates. | 36 |
fomc | 2,003 | We did. | 3 |
fomc | 2,003 | I don't think a daily call is required, but if you're talking just about basic updates, is there interest in doing that? | 25 |
fomc | 2,003 | I'd suggest weekly. | 4 |
fomc | 2,003 | Yes, perhaps weekly. | 5 |
fomc | 2,003 | Fine. | 2 |
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