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fomc | 2,003 | That's a great idea. | 5 |
fomc | 2,003 | One of the advantages of doing that, incidentally, is that the interaction among the Committee members will create a higher level of insight as to what is going on. Too often that kind of discussion would be a waste of time. I don't think it would be in this case. So shall we commit to that? SEVERAL. Yes. | 69 |
fomc | 2,003 | Okay, let's do it. President Stern. | 9 |
fomc | 2,003 | I support your recommendation. | 5 |
fomc | 2,003 | President Poole. | 4 |
fomc | 2,003 | Mr. Chairman, I support your recommendation on the intended federal funds rate, but I have a question about the other two aspects of it. I agree completely with your rationale and your discussion about the difficulty of assessing the balance of risks. What I'm concerned about is that people in the markets didn't hear o... | 179 |
fomc | 2,003 | Well, I think we can try, but we will never succeed in that respect. There's no way of so manipulating the views and attitudes of the marketplace that we can expect to alter them in a period like this. When there is continuity in the marketplace, I think we do convey our intent, and I think we do it rather well. But th... | 158 |
fomc | 2,003 | I agree. | 3 |
fomc | 2,003 | President Broaddus. | 5 |
fomc | 2,003 | Mr. Chairman, I can accept your recommendation. I have some of the same kinds of reservations and concerns that Bill Poole just expressed. I understand your rationale, and I think it makes sense. But this is a change, and I'm nervous because I don't know how the markets and the public more broadly are going to accept i... | 87 |
fomc | 2,003 | Well, the draft language does try to deal with that. I'll circulate the draft so you'll get a sense of what it tries to convey. Let me just say this, however. There is no way we can get this done without a part of the market distorting what it is we're trying to do. I know of no words that we can use to avoid that. | 74 |
fomc | 2,003 | I agree. | 3 |
fomc | 2,003 | Basically, the only questions we have to be concerned about are, does it undermine the structure of the market or does it significantly affect the credibility of this institution? I think the answer is "no" in both cases. But I'm also confronted with Knightian uncertainty in this respect. | 56 |
fomc | 2,003 | If I could, I'd like to follow up briefly on the conversation you were having with Ned a minute ago. I would urge the Committee to think a bit more fully about how we would deal with the risk of deflation, and especially public concern about deflation if that hits us, should we get into a situation where we're closer t... | 179 |
fomc | 2,003 | We had only one event. | 6 |
fomc | 2,003 | That's right. | 3 |
fomc | 2,003 | We're 0 for 1. | 7 |
fomc | 2,003 | In any case, while I don't expect this, it's not hard for me to imagine events unfolding in such a way in the current period of volatile situations that we could find ourselves approaching the zero bound. Actually, I think it's easy to imagine a situation where the funds rate moves below 1 percent fairly abruptly. I'm ... | 418 |
fomc | 2,003 | I agree. I don't think we have much time, but I believe we've done a lot more thinking about this than is implied by your remarks. The real danger here is that this market is running up on the expectation that the real problem is the Iraqi war, that we are going to get the Iraqi war resolved, and that there's an increa... | 208 |
fomc | 2,003 | Actually, Mr. Chairman, I have had the staff start a fact book on the zero bound situation, which will list the unusual actions mentioned in the recent speeches by you and Governor Bernanke. It will include the authority under which the actions can be taken and any historical precedent. The work has been fairly closely... | 227 |
fomc | 2,003 | Well, you are looking at the question of at what point money market funds run into trouble and at the timing of other structural difficulties in the system that may occur well before we get to the zero bound. | 41 |
fomc | 2,003 | People are working on a couple of aspects of that. We're looking at it in terms of depositories, the compression of deposit rates and money fund rates, and just generally wondering about market functioning. For instance, if the general collateral rate is 1/2 percent, then the unattractiveness of failing to deliver secu... | 69 |
fomc | 2,003 | I would argue two things, Mr. Chairman. One relates to your last point, which is similar to what Al Broaddus had to say. It's not the zero bound that is necessarily driving this. Second, obviously on September 11 or shortly thereafter, we saw some of this as we were pumping a lot of liquidity into the markets. It will ... | 102 |
fomc | 2,003 | Governor Olson. | 3 |
fomc | 2,003 | I support both parts of the recommendation. | 8 |
fomc | 2,003 | President Moskow. | 4 |
fomc | 2,003 | Mr. Chairman, I support the recommendation, too, and I'm delighted to hear that this contingency planning is already under way. I certainly hope we never have to use it, but I think it is important that we do the planning now. I have just one comment regarding the phrase "heightened surveillance." I hope we're going to... | 107 |
fomc | 2,003 | We've chosen not to use that wording. | 8 |
fomc | 2,003 | I'm delighted. | 3 |
fomc | 2,003 | President Minehan. | 4 |
fomc | 2,003 | I agree that we should not make a policy change at this meeting. Now is not the time to move. My desire would be to stay as low key as we possibly can and let things play out over the next couple of weeks whatever way they're going to play out. The second part of your recommendation I have a bit more trouble with. I do... | 434 |
fomc | 2,003 | Well, that was my forecast. | 7 |
fomc | 2,003 | Well, we don't have a lot more information as of March 18, and I don't know whether we're going to have a lot more information by early May. | 32 |
fomc | 2,003 | Actually we do have more information. | 7 |
fomc | 2,003 | More negative information. | 4 |
fomc | 2,003 | No, not necessarily. | 5 |
fomc | 2,003 | The war is starting. | 5 |
fomc | 2,003 | Incidentally, remember that I testified as I did regarding the probabilities of a strengthening economy because that was consistent with the actual forecasts of the members of this Committee. | 32 |
fomc | 2,003 | That's right. | 3 |
fomc | 2,003 | I was locked into explaining why everybody had an accelerating growth forecast back in late January. | 17 |
fomc | 2,003 | That's right. I shouldn't have laid it so much at your doorstep. That was what we said in our forecasts as of the January meeting because those forecasts picked up the trend from the end of last year and into the early weeks of this year. That's clear. But I think the market is going to read the absence of a statement ... | 102 |
fomc | 2,003 | It really hasn't in the past. We have moved on innumerable occasions when we didn't have very much of a clue as to how the markets were evolving. Governor Bernanke. | 35 |
fomc | 2,003 | Mr. Chairman, I support both parts of the recommendation. | 12 |
fomc | 2,003 | President McTeer. | 5 |
fomc | 2,003 | So do I. | 4 |
fomc | 2,003 | Do we have anybody else? | 6 |
fomc | 2,003 | That does it. | 4 |
fomc | 2,003 | Now for the high moment of the day, what are you going to read? | 16 |
fomc | 2,003 | Well, what I will be reading is from page 13 in the Bluebook. | 17 |
fomc | 2,003 | Yes, what we vote on is the language shown in the Bluebook. | 15 |
fomc | 2,003 | The directive wording is the following: "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 main... | 66 |
fomc | 2,003 | Call the roll. | 4 |
fomc | 2,003 | Chairman Greenspan Yes Vice Chairman McDonough Yes Governor Bernanke Yes Governor Bies Yes President Broaddus Yes Governor Ferguson Yes Governor Gramlich Yes President Guynn Yes Governor Kohn Yes President Moskow Yes Governor Olson Yes President Parry Yes | 50 |
fomc | 2,003 | Would you circulate the draft press statement? Is that generally acceptable? | 13 |
fomc | 2,003 | Bravo! | 2 |
fomc | 2,003 | Hearing no objection, the last item on the agenda is the date of our next meeting. | 19 |
fomc | 2,003 | May 6. | 4 |
fomc | 2,003 | Our next official meeting is May 6, but we will be meeting, obviously, via weekly telephone conferences. I suspect the first one will be next Tuesday. We will do it on Tuesdays. We'll have the staff circulate a questionnaire to try to determine what times would be most convenient for the majority of members to have tho... | 120 |
fomc | 2,003 | Who would like to move approval of the minutes of March 18? | 14 |
fomc | 2,003 | So moved. | 3 |
fomc | 2,003 | Approved without objection. Dino Kos, you have the floor. | 12 |
fomc | 2,003 | 1 Thank you, Mr. Chairman. I'll be referring to the charts that were distributed a short time ago. Since the last Committee meeting, markets have been characterized by a mixture of uncertainty about--among other things--the outlook for the economy, residual geopolitical risks, and SARS. Simultaneously, the degree of ri... | 2,524 |
fomc | 2,003 | A collective action clause (CAC) may be in the gazillion new issuances that follow the Mexican and Brazilian ones, both of which apparently required very little if any premium in the marketplace to obtain the CAC. Is there any evidence among emerging-country borrowers that use of the CAC will now spread significantly? ... | 68 |
fomc | 2,003 | I'm not an expert in that particular area. Certainly some of the stigma associated with the CAC will be taken away. One of the concerns that officials had worried about was that there would be some stigma associated with being first off the block with a CAC. With Mexico and Brazil having moved to include CACs, there ma... | 97 |
fomc | 2,003 | May I make a comment? I think the general Street talk in New York is that, since the Mexicans have been the most vehemently opposed to CACs, their going first was rather statesmanlike--especially since they didn't pay anything for including the CAC. The Brazilians went next, but there's a big question as to whether les... | 101 |
fomc | 2,003 | Talking about Brazilian debt as high quality is a bit of a change. | 14 |
fomc | 2,003 | Could I add one other point based on the work that I've done on this? Two other countries have been mentioned in this regard, and one is Korea, which for geopolitical reasons obviously is not going to go to the market any time soon. But they have been among the emerging-market countries that were most supportive of the... | 170 |
fomc | 2,003 | President Poole. | 4 |
fomc | 2,003 | I have a question about the construction of one of the graphs on page 3. At the bottom left you show the dollar value of the euro issues. Are those converted at the exchange rate of the month in question? | 44 |
fomc | 2,003 | I believe so, yes. | 6 |
fomc | 2,003 | If we look at July '01, for example, the height of that bar is about the same as the previous bar, which I guess is for April '01. But in fact the dollar price of the euro was quite different at those times. So if you depicted the values in euros, the bars on the right-hand side would not look quite so high relative to... | 105 |
fomc | 2,003 | That's true, yes. | 5 |
fomc | 2,003 | And the bars some time back would be converted at $1.03 or something like that. I don't know exactly--my memory of those rates is not that solid. But the point is-- | 39 |
fomc | 2,003 | The swings are really quite large, though. | 9 |
fomc | 2,003 | Oh, I know they are. I'm just saying that it might be more useful for our purposes not to plot the changed dollar price of the euro with the actual euro issuance. Presenting that in euro terms might be a little clearer for our purposes. | 50 |
fomc | 2,003 | Yes, I think for us it was a question of data that were available on short notice. But I think you're right that that would be a better way of presenting it. | 35 |
fomc | 2,003 | Thank you. | 3 |
fomc | 2,003 | Further questions for Dino? I need a vote. | 10 |
fomc | 2,003 | Move approval of domestic operations. | 6 |
fomc | 2,003 | Without objection they are approved. Dino, you want to discuss the Canadian and Mexican swap renewals? | 20 |
fomc | 2,003 | Yes. It's May, which means that it's time to take up the renewal of those swaps. They expire in mid-December; but because of the six-month notice that would have to be given if the Committee chose not to renew them, this is the proper meeting to vote on renewal. I sent out a short memo on this last week, and my recomme... | 87 |
fomc | 2,003 | Questions? | 2 |
fomc | 2,003 | Move approval. | 3 |
fomc | 2,003 | Second. | 2 |
fomc | 2,003 | Approval has been moved. All in favor say "aye." SEVERAL. Aye. | 19 |
fomc | 2,003 | All opposed, say "no." | 7 |
fomc | 2,003 | No. | 2 |
fomc | 2,003 | We now move on to the economic situation. Dave Stockton and Karen Johnson. | 15 |
fomc | 2,003 | Thank you, Mr. Chairman. There has clearly been a narrowing of uncertainties surrounding the outlook as well as a considerable amount of good news for the economy since the March Greenbook was completed. The successful and expeditious completion of the war in Iraq has alleviated some of the pressing concerns that had b... | 2,329 |
fomc | 2,003 | In constructing our outlook for the rest of the world this time, the task we faced was basically the same one we confront each Greenbook: We needed to determine to what extent the information we had received over the intermeeting period was consistent with our forecast in March and to what extent it represented unexpec... | 1,393 |
fomc | 2,003 | Questions for our colleagues? President Parry. | 9 |
fomc | 2,003 | David, I have a question about plant and equipment spending. In the last forecast you indicated that geopolitical uncertainties and risks were likely to be taking a toll on businesses' plans for equipment and software spending. Of course, to some extent those concerns have been resolved, but the forecast for plant and ... | 105 |
fomc | 2,003 | I'd say that in our last forecast the war-related uncertainties were just a part of what we saw as a much broader set of concerns and uncertainties about the economic outlook that were helping to hold back P&E spending. So we hadn't bet a lot on the end of the war being a major source of upward impetus to such spending... | 344 |
fomc | 2,003 | One short follow-up question: The acceleration of equipment and software spending in 2004 is quite marked. Is a significant portion of that due to the end of the favorable tax treatment for equipment and software? | 41 |
fomc | 2,003 | Certainly in the second and third quarters of next year we think we will see a relatively large pulling forward of that spending. If one could look a little beyond the 2004 horizon in this forecast, we'd expect a bit of a pothole in activity in 2005 in part because of that payback on the investment spending. But also w... | 84 |
fomc | 2,003 | Thank you. | 3 |
fomc | 2,003 | President Moskow. | 4 |
fomc | 2,003 | One of the shocks that hit the economy, of course, was the spate of corporate governance scandals. When we look at current risk spreads and credit spreads, they have narrowed relative to their early 2002 levels. I have two questions on this, David. One, do you think we are past the major part of the fallout in financia... | 101 |
fomc | 2,003 | Well, in our forecast we incorporated the view that the worst is past in this area. In fact we'd expect, with the gradual improvement in the pace of growth going forward, that corporate spreads would continue to narrow some over the next six quarters. In essence, there's an increase in profitability and an improvement ... | 231 |
fomc | 2,003 | We continue to hear some of those same stories. | 10 |
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