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fomc | 2,004 | Thank you. I also found the work of the working group helpful in thinking through some of these issues. Like others, I began the exercise thinking that formulaic language would help the Committee communicate because it would narrow the range of words we would be using and the markets would become more comfortable with ... | 279 |
fomc | 2,004 | Governor Bies. | 4 |
fomc | 2,004 | Like several others, I found the efforts of the working group very helpful in terms of laying out the issues we've been talking about at the last several meetings and putting them all together in one place. I also thought that, if I went through all the formulas and the various scenarios, one of them would really appea... | 613 |
fomc | 2,004 | President Poole. | 4 |
fomc | 2,004 | We're using the word "evolution" here. If I could use a genetic analogy, I think we want to be careful that we have some highly selected breeding and not random mutation. [Laughter] To begin my remarks, let me reflect a bit on how we got to where we are--some of the past evolution. Originally, of course, there was no s... | 602 |
fomc | 2,004 | Governor Kohn. | 4 |
fomc | 2,004 | Thank you, Governor Ferguson. I think there should be forward-looking elements in what we announce to the public when we make our policy decisions. The reasons for our decisions, as President Poole was suggesting, always have some forward-looking elements in them. But I think we can be a little more helpful than that i... | 669 |
fomc | 2,004 | President Moskow. | 4 |
fomc | 2,004 | I, too, was in the working group and, as you can see, there was obviously not a consensus among the group on how to move forward. I was attracted to the formulaic language, though I recognize that there are some difficulties with it. It doesn't apply to every specific circumstance, but it does provide a very good frame... | 508 |
fomc | 2,004 | Vice Chairman Geithner. | 6 |
fomc | 2,004 | Let me just make a complicating observation, which is that I'm not quite sure what we think we mean when we say we're in favor of "gradual evolution." Many of you who have spoken today of gradual evolution have somewhat different views about the future statement in terms of what the third paragraph should be. So I was ... | 98 |
fomc | 2,004 | I'm glad you asked because I was going to try to summarize the discussion and be more explicit about where I think we are. I've listened and written down some notes. Clearly a number of you--though not a majority--would like us to discontinue anything that looks like a risk assessment. I'm interpreting that even more b... | 730 |
fomc | 2,004 | Yes. I'm happy to associate myself with that consensus. | 11 |
fomc | 2,004 | Okay, that is the broad consensus. Let me say one other thing. Though the Chairman introduced the subject and got us somewhat focused on gradual evolution, from some previous discussions I think that is also a reflection of the broad middle view among the Committee members after having looked at the pros and cons of th... | 780 |
fomc | 2,004 | I'll combine a couple of things at this point. Let me start out by saying that, if the consensus conforms with the view that you have just summarized, I can live with that. I originally was in favor of releasing the minutes earlier, and my thinking was that doing so would allow us to get rid of the risk statement. I kn... | 414 |
fomc | 2,004 | President Santomero. | 5 |
fomc | 2,004 | Thank you. I don't view releasing the minutes earlier as necessarily a bad idea. I do have two caveats associated with that view, and they are important to me. The first is that we should not do so and also expand the "blackout period" so that we end up with three or four weeks of blackout, essentially moving us backwa... | 428 |
fomc | 2,004 | So you come out with trying the mechanics of this without going to the last step of releasing the minutes? | 21 |
fomc | 2,004 | Yes, to make sure that we're happy with the results. We can have a whole year of experience. We could ask ourselves, If we were going to release these minutes, do we think that would change the market? Why or why not? Do we think the mechanical issues would make it impractical to release the minutes for four or five we... | 98 |
fomc | 2,004 | Okay. President Santomero has laid a third alternative on the table. President Stern. | 18 |
fomc | 2,004 | I've long been relatively enthusiastic about releasing the minutes earlier, and that continues to be my view. I think Tony's suggestion for doing some dry runs is a constructive one. I've basically thought that the minutes are an underappreciated asset. They contain a lot of information, but people don't pay any attent... | 219 |
fomc | 2,004 | Governor Gramlich. | 4 |
fomc | 2,004 | Thank you. First, Roger, I thought you had a very good summary of the first discussion. There was something you said then that I would like to emphasize regarding the last item in the first column in Vincent's table, "discontinue the assessment of risks portion of the statement." I believe that you said we would be fle... | 490 |
fomc | 2,004 | We did the easy part of the experiment, which was the staff side. Well, it may not have been easy for the people actually drafting the minutes. We created a rough draft by about this time next week. We'll do that again. The harder part of the experiment is resolving how you will comment on the draft. Will you want to s... | 145 |
fomc | 2,004 | President Broaddus. | 5 |
fomc | 2,004 | I strongly favor moving forward the release of the minutes, but let me review briefly how I get there. I go back to the basic principle of the way I understand how monetary policy affects the economy--what we used to refer to as the transmission mechanism. Namely, what we do and what we say affects expectations about f... | 674 |
fomc | 2,004 | Okay. Governor Bernanke. | 6 |
fomc | 2,004 | Thank you, Governor Ferguson. One of the reasons we find it difficult to issue a policy statement is that there's such a wide divergence of views around the table. The special advantage of the minutes is that they represent the diverse views and give some perspective and depth to the discussion. They also include a lot... | 316 |
fomc | 2,004 | President Minehan. | 4 |
fomc | 2,004 | Thank you, Roger. First of all I'd like to congratulate you on your somewhat brilliant description of gradual evolution. I think there was something in there that everybody could hang onto and like. | 37 |
fomc | 2,004 | Oh no, you caught me! | 7 |
fomc | 2,004 | It's going to be interesting to see this evolution. But as you've described it, I'm comfortable with it, and I think that's the way we should go. I must say that I thought Governor Bies was correct and conveyed my sense of the value of ambiguity in a short statement. We've used it a lot. If one goes back and looks at t... | 636 |
fomc | 2,004 | Thank you, Cathy. I always make it a practice of calling for a coffee break whenever anyone says something nice about me. This seems like a good time to have a coffee break. | 37 |
fomc | 2,004 | Now I'll know in the future! | 7 |
fomc | 2,004 | President Parry. | 4 |
fomc | 2,004 | I'm interested in but not yet enthusiastic about accelerating the release of the minutes. I think the information advantage to the markets of getting the minutes roughly in their current form several weeks earlier would be meaningful. But since the earlier release of the minutes would become a significant policy event ... | 201 |
fomc | 2,004 | Thank you. President McTeer. | 8 |
fomc | 2,004 | Governor Ferguson, I think Cathy described your summary of the risk-assessment discussion as somewhat brilliant. I agree with that although we don't need another coffee break! [Laughter] When you summarized the discussion I thought you had left open the possibility of discontinuing the formal risk-assessment portion of... | 461 |
fomc | 2,004 | President Guynn. | 4 |
fomc | 2,004 | Thank you, Governor Ferguson. I agree with your characterization of the way to think about this as being risk management. That's a concept the Chairman has used in other policy discussions. I don't think the risks are so large in terms of the process of producing the minutes, though I see some small risks there. And li... | 467 |
fomc | 2,004 | President Pianalto. | 4 |
fomc | 2,004 | Thank you. For all the reasons that were listed as pros in Vincent's presentation, I was leaning toward supporting early release of the minutes. However, some of the cons listed on the same page and in Brian Madigan's memo are more troublesome to me. I think they also present some greater risks, especially the temptati... | 238 |
fomc | 2,004 | Thank you. Governor Bies. | 7 |
fomc | 2,004 | Thank you, Governor Ferguson. I'm going to come out on the side of supporting earlier release of the minutes. Let me tell you why. In response to the comment that the early release of the minutes would be another news event and could move the market, I'd point out that we are out giving speeches all the time. Our publi... | 458 |
fomc | 2,004 | President Poole. | 4 |
fomc | 2,004 | Thank you. I'm quite skeptical of early release of the minutes. Let me say that I start from the position that the minutes must absolutely be true to the transcript that is going to be released five years later. We can't have a discussion of an issue that might be sensitive and leave it out of the minutes entirely; som... | 572 |
fomc | 2,004 | Governor Kohn. | 4 |
fomc | 2,004 | Thank you, Governor Ferguson. On balance I'm leaning in favor of early release of the minutes. I think there is a lot of information in them. It's a much more complete explanation of why we did what we did and how we look at the future--points that I made before in talking about the statement. And as President Minehan ... | 358 |
fomc | 2,004 | Thank you. President Moskow. | 7 |
fomc | 2,004 | This is a very important issue, and on balance I come out favoring early release of the minutes. It might make us a little uncomfortable at times; but I think, as the document said, it will also make us more accountable, and in my view that's a plus. It's a real positive in that it improves our transparency. Quite fran... | 575 |
fomc | 2,004 | Vice Chairman Geithner. | 6 |
fomc | 2,004 | Coming new to this discussion, I have been more moved by the arguments in favor of accelerating the release of the minutes than I am troubled by the arguments against. But the arguments against are proliferating, and those arguments are significant. Some of them I hadn't thought through, and I believe they're worth thi... | 329 |
fomc | 2,004 | Governor Olson. | 3 |
fomc | 2,004 | May I ask the Vice Chair a question? | 9 |
fomc | 2,004 | Sure. | 2 |
fomc | 2,004 | What do you have in mind? Let me put it this way: A dry run as an abstraction obviously has a purpose. You're suggesting that it won't work. Nonetheless, you're agreeing with the purpose of it, which means you have an alternate suggestion. | 50 |
fomc | 2,004 | Why don't we ask the barons of this place to explore a bit some of these technical questions that haven't been explored in detail in the paper? Why don't we ask them to do that, and come back to us before we go through the mechanics of launching a dry run? I suggest that because I think those issues are more important,... | 80 |
fomc | 2,004 | Let me give Governor Olson a chance to speak, and then I'll try another summation--or the Chairman may want to speak, and then I'll try another summation. | 34 |
fomc | 2,004 | Let me make a couple of points. First of all, I think there are two goals in this process: clarity and transparency. Going back to the risk-assessment issue and speaking as a gradual evolutionist--regardless of what alternative we might have chosen among the risk-assessment alternatives--in spite of the fact that we th... | 466 |
fomc | 2,004 | Chairman Greenspan on the early release of the minutes. | 12 |
fomc | 2,004 | There is a major issue here that I find troublesome, and I don't know how to get around it, though I recognize that it may be feasible to do so. It's the issue that Tony Santomero has raised. We have very scrupulously avoided a nineteen-member communique-type discussion of the post-meeting statement. Now, if we take th... | 1,511 |
fomc | 2,004 | Thank you. Let me first disclose what I think the tally is. There are, I believe--it's hard to get all the nuances right--seven or maybe eight people whom I would describe as not enthusiastic. The remainder apparently feel that they've weighed the pros and cons and on balance are more comfortable going ahead with an ea... | 562 |
fomc | 2,004 | I would just like to interject that I think we can make the dry run a bit more effective, recognizing that, as Tim said, we won't really know what the market feedback would be. Nonetheless, we should put some effort into addressing the minutes issue by preparing them for publication and then reading them again at the t... | 97 |
fomc | 2,004 | Yes, I think that's an important point. We're obligated to take this test seriously. Unless that is done, we're going to learn nothing. If we all essentially try to replicate what we would do in the real game, I think we'll learn something. | 50 |
fomc | 2,004 | I think the staff needs to help us figure out if there's a way to look at the content of the minutes at the time they are completed as well as the incoming data since the meeting and judge what the market reaction might have been. We need to try to get an approximation, though admittedly a very rough one, of how the ma... | 71 |
fomc | 2,004 | You know what we'll learn? We're going to learn how many iterations we need. | 16 |
fomc | 2,004 | Oh, we'll learn that. | 6 |
fomc | 2,004 | That's one of the crucial aspects. I've sat through the writing of too many G-7 communiques, and that process makes the old sausage factory analogy seem benign. And the FOMC has more members than the G-7. | 47 |
fomc | 2,004 | Could I suggest in the interest of time, unless someone has a burning issue here, that we move on to the third topic, which is the role of projections. That is also very important to a number of people. Can we start our go-around on that? Would you like to start, Mr. Chairman? | 63 |
fomc | 2,004 | I might as well since I have the floor. | 10 |
fomc | 2,004 | You always have the floor! You can exercise that prerogative. | 14 |
fomc | 2,004 | I have very considerable concerns about this. Let me say, first, that if somebody is merely arguing that we should substitute core PCE for the CPI in our projections, I think that's fine. If somebody is discussing the width of uncertainty bands for the projections, I'm all for that. But remember what these "forecasts" ... | 1,111 |
fomc | 2,004 | President Hoenig. | 4 |
fomc | 2,004 | Thank you. Let me just say that the idea of using the projections came to me perhaps more as a reflection of how much I disliked the risk statement than how much I really liked the projections. So, given the almost brilliant discussion of the risk statement, I'm not married at all to the projections. I understand all t... | 116 |
fomc | 2,004 | Okay. President Santomero. | 7 |
fomc | 2,004 | Are we still on the risk statement? [Laughter] | 12 |
fomc | 2,004 | We're theoretically on the role of the projections. You have the floor. | 14 |
fomc | 2,004 | Well, I concur with the Chairman on this one. I think we have to keep in mind that we're not in the forecasting business. And we should not do anything to reinforce the notion that eight or ten times a year we have a forecast of the macroeconomy, no matter what its statistical validity. It takes away from what people s... | 142 |
fomc | 2,004 | President Stern. | 3 |
fomc | 2,004 | I'm not in favor of changing the way we currently deal with the forecasts. When the idea first surfaced, I thought it was intriguing. But the more I thought about it, the more I thought it would raise more questions than it would answer. We would get into the business of trying to explain or trying to qualify what all ... | 124 |
fomc | 2,004 | Governor Gramlich. | 4 |
fomc | 2,004 | I agree with everybody else and in particular with the Chairman. I'll make an admission here. I don't really forecast. I have forecasters on the staff over there, and they do a thorough job. They run alternative simulations. If something looks a little funny to me, I can pick up the phone and ask why that is and dig in... | 211 |
fomc | 2,004 | President Broaddus. | 5 |
fomc | 2,004 | I think Ned's comment is a good one. I would like to find a way to get rid of that obligation as well. If there were some possibility of communicating the staff forecast--or whatever kind of consistent forecast we could possibly develop--and talk about how that outlook deviates from our ultimate objective, that's what ... | 120 |
fomc | 2,004 | Governor Bernanke. | 4 |
fomc | 2,004 | Thank you, Governor Ferguson. Basically I'm just going to make a few suggestions for marginal changes in our current practice that might be useful. But then I want be the devil's advocate at the end of my remarks. First, I think we should substitute or add the core PCE because that probably is, after all, the measure m... | 427 |
fomc | 2,004 | So far! | 3 |
fomc | 2,004 | So far, and that's all we can evaluate the forecasts on. There's also evidence that suggests that the Taylor rule based on FOMC forecasts is a better descriptor of Federal Reserve behavior than other naive type of Taylor rules. So I think it's an empirical question whether or not they're useful. Again, I'm not suggesti... | 88 |
fomc | 2,004 | President Minehan. | 4 |
fomc | 2,004 | Thank you, Roger. I think the question of whether or not we should release forecasts is intriguing. But on balance I come to the view that we should not for many of the reasons others have talked about. I also think we ought to be clear as to what we're talking about because it seems to me that two different proposals ... | 532 |
fomc | 2,004 | President Parry. | 4 |
fomc | 2,004 | Thank you. I assume that we'll continue with the MPR forecast, so I would suggest only minor changes much along the lines of those mentioned by Governor Bernanke. I think going to the core PCE measure makes a lot of sense because that's in fact what we focus on. And I'd probably favor a slight change in terms of the du... | 105 |
fomc | 2,004 | President McTeer. | 5 |
fomc | 2,004 | Back when Mike Prell was in charge of the staff's forecast, the way I did mine was to subtract a percentage point from inflation and add it to real growth. [Laughter] | 38 |
fomc | 2,004 | The McTeer rule! | 6 |
fomc | 2,004 | My practice now is to get very, very close to the staff forecast. But putting standard errors around my forecast would be, as they say in Texas, like putting lipstick on a hog! [Laughter] | 42 |
fomc | 2,004 | President Guynn. | 4 |
fomc | 2,004 | Do I have to follow that? Could I ask for a bye and have you come back to me? I'm going to risk a bloody nose. I think the Chairman has already popped my balloon before I tried to blow it up! I've actually been laboring under the apparently false impression that we are in fact in the forecasting business. I've assumed ... | 480 |
fomc | 2,004 | Your head is unbowed! President Pianalto. | 11 |
fomc | 2,004 | I concur with the Chairman. I don't think there is anything to be gained by an enhanced role for FOMC member projections. I, like others, am not in the business of forecasting. My staff does not prepare projections. I rely on the Greenbook projections as a starting point. So I'm not in favor of expanding the role of th... | 74 |
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