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fomc | 2,003 | Governor Gramlich. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. It can be very frustrating when one's intuition does not square with the results of one's models. College football has this problem right now. [Laughter] It should be obvious to everybody that USC is the best team, but when the model builders try to develop a system that weighs whom each team b... | 863 |
fomc | 2,003 | President Hoenig. | 4 |
fomc | 2,003 | Mr. Chairman, the Tenth District economy is similar to the District economies others have described in that it continues to expand and has done so fairly clearly since our last meeting. Businesses are showing some real confidence that the recovery now is going to sustain itself. Let me talk just a minute about regional... | 970 |
fomc | 2,003 | Governor Ferguson. | 3 |
fomc | 2,003 | Thank you, Mr. Chairman. A few months ago the nation embarked on an important and interesting experiment in macroeconomics. Most of us had confidence that the stimulative policies being put in place would have the desired effect, but the timing and the magnitude of that effect were a bit uncertain. The question was how... | 823 |
fomc | 2,003 | Governor Olson. | 3 |
fomc | 2,003 | I'd like to bring up two points that largely haven't been talked about here. The first involves fiscal policy issues. I'm sure you've noticed that the government is being funded at the moment on a continuing resolution. The House yesterday passed an omnibus budget bill that I think is totally consistent with Greenbook ... | 550 |
fomc | 2,003 | Governor Bernanke. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. The economic news since our last meeting has been heartening. The odds that we have begun a strong and sustainable expansion have risen significantly. Because of the rise in growth, we're going to see even more op-ed articles, wire stories, and editorials opining that the Fed needs to tighten s... | 1,217 |
fomc | 2,003 | Governor Bies. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. Since our last meeting the news about economic growth, as many people around the table have already said, is much stronger. One point I'd note is that I'm very happy to see that growth is more balanced in terms of coming from more sources. It is no longer relying totally on consumer spending; b... | 855 |
fomc | 2,003 | Thank you very much. Brian Madigan, please. | 11 |
fomc | 2,003 | 2 Thank you, Mr. Chairman. I'll be referring to the material that is being distributed now. Financial markets were subject to two strong crosscurrents over the intermeeting period: generally robust economic data and policymakers' statements emphasizing that policy could remain accommodative for a long time. As of the c... | 2,485 |
fomc | 2,003 | Questions for Brian? | 4 |
fomc | 2,003 | I think I'm speaking for most of us when I say that I hope this table doesn't get more complicated than it is. [Laughter] | 28 |
fomc | 2,003 | You haven't seen the three dimensional one yet! | 9 |
fomc | 2,003 | No, I haven't, and I don't want to! | 11 |
fomc | 2,003 | Those who participate in drafting the Bluebook would share that view. | 13 |
fomc | 2,003 | Further comments or questions? If not, let me get started. It's fairly evident that the economy is at a turning point by virtually all the measures that we have. Historically, it has almost invariably been the case that the Federal Reserve would tighten under such conditions. Indeed, preemption is something that has fi... | 1,814 |
fomc | 2,003 | Well, I support the recommendation. As I said, I have a hard time getting the right flavor, given the logic of the table that Brian has in exhibit 2. My logic is that we are in the northwest and we want to get to the northeast, or from low inflation as the predominant concern to a balanced inflation risk assessment. I ... | 137 |
fomc | 2,003 | President Minehan. | 4 |
fomc | 2,003 | At the end of the earlier discussion I was going to say that the policy decision continues to be a "no-brainer" but that what we say about policy has become a headache. I'm not sure about the no-brainer part anymore, but I am sure about the headache! I agree with you that we don't want to move policy now. I think the u... | 535 |
fomc | 2,003 | President Moskow. | 4 |
fomc | 2,003 | Mr. Chairman, I think your proposal is an excellent one. I very much like the fact that you've narrowed the balance of risks on unwelcome disinflation versus inflation. I think that's desirable. I like dropping the overall balance of risks statement, and I particularly like conditioning the "considerable period" of tim... | 129 |
fomc | 2,003 | Yes. Let me just quickly read that paragraph. It's very short. "The Committee continues to believe that an accommodative stance of monetary policy, coupled with robust underlying growth in productivity, is providing important ongoing support to economic activity. The evidence accumulated over the intermeeting period co... | 87 |
fomc | 2,003 | I think that's very good. I spent a lot of time trying to figure out how we were going to get out of this dilemma we have with the language and what the wording should be. I think you've captured our assessment of the situation very, very well. | 52 |
fomc | 2,003 | President Poole. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. The way I tend to approach this is that I want to be very clear in my own mind about what I believe before I try to talk about how to communicate it. So let me start with what I believe. I think that the inflation risks are balanced and that the output risks are balanced. I believe there is a l... | 584 |
fomc | 2,003 | Governor Bernanke. | 4 |
fomc | 2,003 | I think it would be a mistake to drop that language entirely. In my view making it conditional is the right way to proceed, and I support your recommendation. | 32 |
fomc | 2,003 | Governor Bies. | 4 |
fomc | 2,003 | Mr. Chairman, while I'm still uncomfortable with a policy commitment in the proposed wording, I feel much better with the introductory phrase "with inflation quite low and resource use slack," which makes it a conditional statement. I also like dropping the language that wraps up our assessment of the balance of risks.... | 71 |
fomc | 2,003 | Governor Ferguson. | 3 |
fomc | 2,003 | Thank you, Mr. Chairman. This is a Committee of nineteen people, and I think we're in the area of a judgment call as much as anything else. If I were doing this individually, I would have retained the summation sentence and not changed it very dramatically, but I would have made the other changes you recommended. I don... | 122 |
fomc | 2,003 | Governor Kohn. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. I support your recommendation. I think we're moving in the right direction, recognizing that the balance of risks is in the process of changing or in fact has shifted. Over the last couple of months, the statement hasn't changed very much, but the economy has, and I think we're in the process o... | 308 |
fomc | 2,003 | I don't disagree with the way you phrased it. | 11 |
fomc | 2,003 | Okay. | 2 |
fomc | 2,003 | President Hoenig. | 4 |
fomc | 2,003 | Mr. Chairman, obviously I agree with your policy recommendation for the funds rate. I don't agree with the change in the statement. I think we have an opportunity here to identify the risks as balanced and drop the "considerable period" statement. If we were to remove that statement, I think the market might, as Presid... | 143 |
fomc | 2,003 | President Guynn. | 4 |
fomc | 2,003 | Mr. Chairman, after the first go-around I made a note to myself during the break that if I were a committee of one I would drop completely the reference to further disinflation. I think we learned earlier that repeating phrases gets us into trouble. I noted also that I would like to characterize the inflation risk as e... | 161 |
fomc | 2,003 | President Santomero. | 5 |
fomc | 2,003 | I support your recommendation, Mr. Chairman. When I entered the room, the questions in my mind were how to deal with these risk-balance statements and how to deal with the "considerable period" sentence. I wondered whether or not the group would be willing to take steps to address both of those issues in one meeting. I... | 206 |
fomc | 2,003 | President Parry. | 4 |
fomc | 2,003 | Thank you, Mr. Chairman. As you know, I've indicated a preference for balance in terms of the inflation risk. It seems to me, however, that the suggestion you have made moves us a long way in that direction and, therefore, I'm very comfortable with your recommendation. | 56 |
fomc | 2,003 | President Pianalto. | 4 |
fomc | 2,003 | I support your recommendation, Mr. Chairman. Brian indicated in his remarks that one rationale for dropping the "considerable period" language is that one is opposed to a policy precommitment. I've been opposed to the policy precommitment all along, but I don't think dropping that sentence at this time conveys that mes... | 107 |
fomc | 2,003 | First Vice President Lyon. | 5 |
fomc | 2,003 | Mr. Chairman, I support your recommendation. The proposed language captures our view of the impact of recent developments and, as you have outlined, preserves policy flexibility. | 32 |
fomc | 2,003 | Governor Olson. | 3 |
fomc | 2,003 | I support both the policy decision and the statement. | 10 |
fomc | 2,003 | President Broaddus. | 5 |
fomc | 2,003 | Mr. Chairman, I support your policy recommendation. I especially liked what you said about preemption and particularly the issues we could face now in that regard versus what we faced when the inflation rate was 3 percent or higher in past periods. I could accept Don's edit regarding preemption, but I like the general ... | 283 |
fomc | 2,003 | Vice Chairman Geithner. | 6 |
fomc | 2,003 | I'm comfortable with both the policy recommendation and the statement as crafted. I think the statement you've proposed is better than the alternatives. In my view we're at a point where it's appropriate to dial back a bit the forward-looking signal we're sending. You're proposing to do it in four different ways, and I... | 151 |
fomc | 2,003 | President McTeer. | 5 |
fomc | 2,003 | I support your recommendation. I would have preferred to eliminate the "considerable period" phrase, get it over with, and start the New Year out with a clean slate; but I support your recommendation. | 41 |
fomc | 2,003 | Would you read the appropriate text, please? | 9 |
fomc | 2,003 | I'll be reading the directive wording on page 15 of the Bluebook and, with regard to risk assessments, the first two sentences that the Chairman read to you from the draft press release. That's what is being voted on. With regard to the directive itself: "The Federal Open Market Committee seeks monetary and financial c... | 173 |
fomc | 2,003 | Call the roll. | 4 |
fomc | 2,003 | Chairman Greenspan Yes Vice Chairman Geithner 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 | I suggest that we take a brief recess to get lunch and come back to the table here. Governor Ferguson will then give us a progress report on the activities of his working group. [Recess] | 40 |
fomc | 2,003 | Governor Ferguson has the floor. | 6 |
fomc | 2,003 | 3 Thank you, Mr. Chairman. Let me start by saying that this is merely a progress report from your working group on communications. How long we discuss this today is up to the Committee. I have some comments that will take about five minutes or so, and we can stop there. But there will be time for substantive comments l... | 98 |
fomc | 2,003 | Why don't you indicate the members of the working group. | 11 |
fomc | 2,003 | Okay. My colleagues on the working group are Governor Gramlich, Governor Kohn, Governor Bernanke, President Stern (who's not here today), President Moskow, and President Parry. Our group was asked to consider what Cathy Minehan has described as the headache part of the statement, which is the risk assessment. We recogn... | 1,867 |
fomc | 2,003 | Thank you, Roger. I'm a little worried here. I would just go back to what I said earlier. We have gotten ourselves into a situation where--in the terminology I used before--we have a lot of moving parts in this statement. None of these proposals that you have presented--without going into details on any of them--dimini... | 400 |
fomc | 2,003 | Okay. The Chairman wants to speak, and then I want to respond to your comments. Also, I have a list of people from the last meeting who wanted to speak on this issue but we ran out of time | 43 |
fomc | 2,003 | Oh, I'm sorry. Did I speak out of turn? | 12 |
fomc | 2,003 | No, you did not speak out of turn. I recognized you, so by definition you didn't speak out of turn! | 24 |
fomc | 2,003 | I want to support what Cathy is saying, and I do so from the point of view of somebody who has to figure out how to get a consensus out of this group. It's far easier to get the requisite number of members to support a policy than to support what we say about it. For example, with twelve Committee members and, say, ten... | 407 |
fomc | 2,003 | Let me say a couple of things. One is that the Committee can collectively decide that this is more trouble than it's worth and that we are communicating more than we need to communicate. We can conclude that none of these options feels right for a variety of reasons. We can merely say that this is all very interesting ... | 172 |
fomc | 2,003 | But we're likely to do so after having pored over a fifty-page paper! | 16 |
fomc | 2,003 | We're leaving it to the Committee to decide whether or not we should have a risk-assessment or a forward-looking element in our statement. I don't think we felt that it was appropriate for our little subgroup to do anything more than to say that it is clearly an option not to have that in the statement. We're not takin... | 348 |
fomc | 2,003 | Let me make a couple of comments. I would hope, as we make the decision on the statement, that we have the staff's input on the issue of moving up the publication of the minutes. I say that because I am very concerned about making the press statement the dominant issue. When people read the minutes, they do have a chan... | 393 |
fomc | 2,003 | I have President Santomero next on my list. | 11 |
fomc | 2,003 | It's a little hard to pick up from the introductory discussion last time, but let me just respond to what I'm seeing before me. I think the idea of projecting out two years and continuously forecasting the outlook two years ahead is going to do more harm to our credibility than aid in clarifying our announcements. So I... | 357 |
fomc | 2,003 | Tom Hoenig. | 4 |
fomc | 2,003 | I'm not quite sure what to say, Roger. I started out, as I've thought about our communications in the last few months, thinking that the earlier release of the minutes would provide us with an opportunity to cut back on the statement. You indicated in an earlier memo to us that cutting back on the statement, even coupl... | 256 |
fomc | 2,003 | Okay. I have Bob McTeer on my list from the last time, and then I have Ned Gramlich, Bob Parry, and Bill Poole. I think we still have the same dilemma we had last month of having to end our discussion by 2:00 p.m. | 59 |
fomc | 2,003 | I agree with Cathy that the statement should be shorter and simpler--very much so. As I've long argued, I don't think we did ourselves a favor when we started announcing a bias vote. I would recommend not having a bias vote. If we don't have it, then we're not being nontransparent by not releasing it. If it's fairly ob... | 239 |
fomc | 2,003 | Ned Gramlich. | 5 |
fomc | 2,003 | I'll try to be quick. In terms of writing a relatively formulaic statement with few moving parts, which as you know I tried to do last time, what happens is that all sorts of difficulties arise. People ask, what are you going to do about this problem? What are you going to do about that problem? I don't want to be so c... | 463 |
fomc | 2,003 | Bob Parry. | 4 |
fomc | 2,003 | Roger, Cathy referred to these three options as having lots of moving parts. I think they are different. The number of moving parts and the number of things we have to agree on are very different. One of the proposals has language we've actually used for years and never had any problems with--or at least very few. Whil... | 110 |
fomc | 2,003 | As I say, this is a judgment call, and obviously, we have nineteen different judges. Bill, what's your view? | 25 |
fomc | 2,003 | I'd like to see a proposal that's pretty close to A--I'll call it A prime--that would focus on the reasons for the policy decision at the meeting and would have a minimal amount of forward-looking elements. So when we judge the risks to be roughly balanced, we leave the federal funds rate alone. When we judge that the ... | 215 |
fomc | 2,003 | Well, I guess I'm going to have the last words because we have only a few minutes left. Here's what I've noted. I heard a range of views about these three options, but I don't think I heard anyone say let's not stress-test them. Some of you may ultimately say it's too complicated and let's not go to a new type of state... | 722 |
fomc | 2,003 | I think that's a red herring. I don't think anybody in the room would argue that, if we choose one of these options, we will have short meetings. There's no argument about that. | 39 |
fomc | 2,003 | No, I'm suggesting that one of the things that may come out of the January meeting is a general consensus that we need to start our meetings a little earlier. I don't know. I'm just saying that that's part of the discussion we're going to have to have. I'm not putting that as an option to be traded off against some of ... | 70 |
fomc | 2,003 | But, Roger, I think it's important to recognize that for any of us who favor a shorter, simpler statement, the length of the meeting has nothing whatsoever to do with that preference. If we had to spend ten hours arguing over policy, I'd be happy to do that. | 55 |
fomc | 2,003 | Well, in fact it's now 2:00 p.m. [Laughter] I was trying a filibuster to that. No, I did say that those two issues are not interchangeable. We may decide that we want a different length of meeting independent of what we decide about the statement. That is an issue that has bubbled up and has to be decided. Now, our Cha... | 85 |
fomc | 2,003 | Let me just indicate to you that in good congressional tradition the clock has stopped at 2:00 p.m. | 23 |
fomc | 2,003 | It's up to you how to proceed. | 8 |
fomc | 2,003 | Well, unless somebody has some formidably important issues to raise at this point, the meeting is adjourned. | 24 |
fomc | 2,004 | Good afternoon, everybody. I'll call on Governor Ferguson. | 11 |
fomc | 2,004 | Thank you. The first order of business is to elect a Chairman and Vice Chairman of the Committee to serve until our first meeting of 2005. The floor is open to nominations for both of those positions. Maybe Governor Kohn would like to make a nomination. [Laughter] | 57 |
fomc | 2,004 | I've been in the undecided category for a long time. Today's the day to make a decision. | 20 |
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