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fomc | 2,004 | Vincent, this may be more of a statement than a question also. But in my experience on this Committee we've never acted in other than a measured way. And I can't see our doing otherwise as we go forward, depending on the data we get. In my view the only thing we accomplish with this word specifically is to put a collar... | 157 |
fomc | 2,004 | May I just interrupt? I'll anticipate what I'm going to say in my comments to you in a few moments. This language enables us to move the next time. But the wording is very interesting. The word "measured" is referring solely to the rate of increase, not to when the increase will begin. We have no way of knowing what th... | 238 |
fomc | 2,004 | Partly my concern is what will happen if the payroll numbers come out better than 300,000 again and we have more inflation. Then what are we going to do next time? | 37 |
fomc | 2,004 | Do you mean what will we say or what will we do? | 13 |
fomc | 2,004 | What are we going to do? We've already told the market if we say "measured" today, what we're going to do next time. | 29 |
fomc | 2,004 | What we will do is that we will move the funds rate up. | 14 |
fomc | 2,004 | Okay. | 2 |
fomc | 2,004 | And the first move we make will be a big deal, especially if it's in June and not in August as everyone expects. Unless you want to move either today or in the intermeeting period, which I would not recommend-- | 45 |
fomc | 2,004 | I understand what you're trying to do in terms of preparing for the next meeting. My only concern is that, once we put this language in there, when the next meeting comes and we have our policy discussion we'll have to worry about the word "measured"--which I think was President Santomero's point. | 63 |
fomc | 2,004 | Anything we do, whether it's 25 basis points or 125 basis points is by definition measured. [Laughter] | 24 |
fomc | 2,004 | That makes me feel a whole lot less well. | 10 |
fomc | 2,004 | You had a measured rise in your temperature! [Laughter] | 13 |
fomc | 2,004 | President Minehan. | 4 |
fomc | 2,004 | We're beating to death the issue that I want to raise here, so it's probably not helpful for me to raise it again. We are debating the term "measured." If we take the phrase that includes "measured" out of sentence 8, we're left with a statement that says we think the policy accommodation can be removed. That raises th... | 218 |
fomc | 2,004 | President Moskow. | 4 |
fomc | 2,004 | May I ask just one other question? Do you see a time when we would take this word out? | 21 |
fomc | 2,004 | I think you would take this word out if you envision circumstances comparable to the latter part of 1994 where you'd be moving, say, 50 or 75 basis points. In other words, if it were February 1994 and we were using this framework, we probably would have sent you a Bluebook that said "policy accommodation can be removed... | 105 |
fomc | 2,004 | So while we have a series of 25 basis point increases it would stay in? | 17 |
fomc | 2,004 | In some circumstances it might be helpful to keep in the "measured" phrase even in the act of tightening so market participants don't extrapolate that tightening more than you think appropriate. | 36 |
fomc | 2,004 | I have a question of process. Do you want to continue this discussion? I can hold my comments and wait, but I want to weigh in on this issue as well. It's a question of whether we're going to come back to it or not. | 50 |
fomc | 2,004 | Oh, of course we can come back to it. | 11 |
fomc | 2,004 | I'll hold my comments until later then. | 8 |
fomc | 2,004 | Mr. Chairman, at this point I think it would be helpful if you would give your views and your policy recommendation, and then we could all say what we think about this. [Laughter] That may avoid our being surprised, just as we don't want to be surprised by the upcoming unemployment report. | 61 |
fomc | 2,004 | Okay, let me talk in a measured manner. [Laughter] First of all, I think there's no question now that this recovery is broad, deep, and evolving into a sustainable expansion. Indeed, I have the suspicion that a very unusual factor in this recovery allows us to project it further than is usually the case. Corporate mana... | 2,421 |
fomc | 2,004 | First of all, I support your recommendation, Mr. Chairman. As I said in my earlier statement, I'd prefer to be gradual, and I'd prefer to start early and stay ahead of the curve, understanding that we can change our mind depending on the way the data come in. To be positioning ourselves for a move of 25 basis points in... | 242 |
fomc | 2,004 | President Guynn. | 4 |
fomc | 2,004 | Mr. Chairman, I wish we were in a position to move today, but obviously we're not. I'm among those who have a strong preference not to introduce another word such as "measured" into our statement. Again, we're all trying to play English major, I think. But I agree with your comment that we cannot know with any certaint... | 245 |
fomc | 2,004 | President Santomero. | 5 |
fomc | 2,004 | I support your proposal. I am a little uneasy about the word "measured" for the reasons I indicated. If I may, I'd like to ask you just one question concerning your thought process. You indicated that at the next meeting we may indeed be in a position of responding with a 25 basis point move--to the extent that the inc... | 89 |
fomc | 2,004 | I don't know what the next move will be. | 10 |
fomc | 2,004 | I'm teasing, of course, just giving an example. | 11 |
fomc | 2,004 | Remember, though, that we haven't made an intermeeting move in quite a long while, and one of the reasons is that we haven't been in the process of making changes in our policy. If we go back and look at the history, we have often moved between meetings. | 55 |
fomc | 2,004 | I agree with you. The question I want to ask is this: If we got positive surprises between now and the June meeting and we felt we needed to raise the funds rate target by 25 basis points, would we also conclude that we needed to take out "measured"? | 56 |
fomc | 2,004 | We might. | 3 |
fomc | 2,004 | Therefore, the next move could be more on the order of 37.5 basis points--that is to say two steps, involving both a 25 basis point increase and the removal of "measured." | 42 |
fomc | 2,004 | Look, unless something very unusual happens between now and June, I think if our first move were 50 basis points that could create some real market disruption. But if our presumption is that we have to accelerate the pace, then I think "measured" should be dropped in June. | 58 |
fomc | 2,004 | If we move and the economy suddenly improves in a manner that is consistent with moving further, it may be more disruptive to have put the word "measured" in the statement than to have left it out. | 42 |
fomc | 2,004 | It may. The tradeoff here is that a disruption will occur now if we don't say something like "measured." And we are at an earlier stage of the economic recovery than presumably we will be later, in which case it's quite conceivable that we might do inadvertent collateral damage. If the market is likely to respond to th... | 145 |
fomc | 2,004 | With that said, I support your recommendation. | 9 |
fomc | 2,004 | Governor Ferguson. | 3 |
fomc | 2,004 | Thank you, Mr. Chairman. I also support your recommendation. We are obviously deep into the question of how we communicate with markets, and we have a general view, I think, that this is not the time to actually move up the funds rate. So let me focus on the way I think about our communications with markets. My sense o... | 516 |
fomc | 2,004 | You are indeed measured. | 5 |
fomc | 2,004 | But supportive. | 3 |
fomc | 2,004 | Vice Chair. | 3 |
fomc | 2,004 | I was going to give a less ringing endorsement by characterizing the proposal as better than the known alternatives. [Laughter] Essentially what we're debating is whether a statement with this ending is too soft, too reassuring about the future path of the fed funds rate. I believe that's the right question to debate. ... | 199 |
fomc | 2,004 | President Stern. | 3 |
fomc | 2,004 | I, too, support the recommendation. I think the language does give us adequate flexibility at least for the next two or three months, as best I can read the situation. And I'm hard pressed to suggest any better alternative. So I support your proposal. | 51 |
fomc | 2,004 | President Pianalto. | 4 |
fomc | 2,004 | Mr. Chairman, I also support your recommendation. I have to admit that, when I first read the "measured pace" language in the Bluebook, I was concerned that it would be interpreted by markets as indicating that we had a predetermined path for moving rates up and that we would be doing it based on a time schedule rather... | 135 |
fomc | 2,004 | Governor Kohn. | 4 |
fomc | 2,004 | Thank you, Mr. Chairman. I support your recommendation and all aspects of it. Like President Minehan, I'd be concerned that, if we just dropped the last sentence, the markets would overreact if not immediately then over the intermeeting period. As data come in, they'd start to build in a 1994-type tightening, which is ... | 328 |
fomc | 2,004 | President Minehan. | 4 |
fomc | 2,004 | I support your recommendation. I think we may need to move sooner than the markets now expect. But that is going to depend largely on the strength of the incoming data, even in the next week. So I look forward to seeing what is in store for us. I very much agree with what Don just said. I think if we left out sentence ... | 237 |
fomc | 2,004 | President Broaddus. | 5 |
fomc | 2,004 | Mr. Chairman, I'm very comfortable with your recommendation. I feel very strongly that we should use the "measured" language for all of the reasons you have listed. I also agree with Roger's and Don's points--and Cathy's as well. Fundamentally there's still a considerable amount of slack in the economy, as I see it. Al... | 561 |
fomc | 2,004 | It was fun! | 4 |
fomc | 2,004 | Well done. Governor Olson. | 6 |
fomc | 2,004 | Thank you, Mr. Chairman. I, too, support the recommendation, and I've been looking carefully at both sentence 8, which Cathy talked about, and the March FOMC statement shown in alternative B. If I compare them word-by-word or even phrase-by-phrase, I can see only minor differences--primarily the removal of the word "pa... | 232 |
fomc | 2,004 | President Moskow. | 4 |
fomc | 2,004 | Thank you, Mr. Chairman. I wasn't here in February 1994, but I'm certainly going to go back and read the transcript to see when you went berserk! [Laughter] | 39 |
fomc | 2,004 | My "berserkedness" was partially edited out. [Laughter] | 16 |
fomc | 2,004 | As for your proposal, I agree with your recommendation on the rate. On the language, I find it hard to disagree with language that people I respect call "brilliant" or "extremely good," but I must say that I'd prefer a different path. I would prefer to drop the word "patience" and not substitute the word "measured." I ... | 328 |
fomc | 2,004 | President Hoenig. | 4 |
fomc | 2,004 | Mr. Chairman, having expressed my opinion somewhat earlier and having listened to all of this commentary, at this juncture I want to give you my measured response to the conversation so far and that is that we have the direction right. I know where we stand in that we need to be looking at the next meeting for some act... | 184 |
fomc | 2,004 | Governor Bies. | 4 |
fomc | 2,004 | Thank you, Mr. Chairman. I, too, am still in the camp that would prefer not have a commitment in the statement. But I like the idea that many of us have been expressing in speeches--that the policy accommodation has to be removed. What I struggled with--and I was interested in listening to what was said about it around... | 270 |
fomc | 2,004 | The answer to that is that the facts are going to determine policy and I should hope that the markets are acutely aware of that. If that were not the case, they wouldn't have been moving the federal funds futures around as the data came in. At the end of the day, if we wished to be stubborn, we could keep the federal f... | 105 |
fomc | 2,004 | I guess I'm asking, Why don't we just say that the pace at which the policy accommodation will be removed will be determined as economic events unfold? I'd prefer to say something like that rather than use a code word such as "measured." | 48 |
fomc | 2,004 | I thought that's what you interpreted that word to mean. | 11 |
fomc | 2,004 | Well, I'm hearing a lot of different interpretations of it, even around this table. | 17 |
fomc | 2,004 | All of which suggests that when we have nineteen people around a table trying to write a statement, as we've indicated on innumerable occasions, there are difficulties in the process. | 34 |
fomc | 2,004 | Yes, there are. | 5 |
fomc | 2,004 | President McTeer. | 5 |
fomc | 2,004 | I also would prefer just to drop "patience" without substituting anything else, but I'll concede that the argument is over. Just so Al can go out as the lonesome dove, though, [laughter] I would like to point out that I don't think any of us--well, maybe one or two of us--really believes that the risks to our goal of p... | 154 |
fomc | 2,004 | We had that discussion about our statement earlier, as you may recall--a couple of meetings ago. We said that, if we had retained our old terminology, "asymmetric to the downside" was really how we viewed the outlook on inflation. But our judgment was that we'd create more problems by changing the wording in our statem... | 76 |
fomc | 2,004 | I understand the practical problem of going two steps, but I think we ought to at least recognize that. "Like a fish" I think is the term we used in high school. | 37 |
fomc | 2,004 | President Poole. | 4 |
fomc | 2,004 | Thank you, Mr. Chairman. I want to make a couple of points. First of all, with regard to long-term inflation expectations, I'm going to use an analogy with the federal funds futures market. Take the reading for September in the futures market. We interpret that not as providing us with any evidence about the state of t... | 605 |
fomc | 2,004 | Governor Bernanke. | 4 |
fomc | 2,004 | Thank you, Mr. Chairman. I support your recommendation. I think the debate going around the table has less to do with our differences in outlook than that there continues to be some fundamental confusion about how we're communicating to the market and what our mechanisms ought to be. I just raise the point that we real... | 156 |
fomc | 2,004 | The secretary will read the resolution for us. | 9 |
fomc | 2,004 | As far as the directive is concerned, the wording can be found on page 14 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... | 204 |
fomc | 2,004 | Call the roll, please. | 6 |
fomc | 2,004 | Chairman Greenspan Yes Vice Chairman Geithner Yes Governor Bernanke Yes Governor Bies Yes Governor Ferguson Yes Governor Gramlich Yes President Hoenig Yes Governor Kohn Yes President Minehan Yes Governor Olson Yes President Pianalto Yes President Poole Yes | 49 |
fomc | 2,004 | Before we adjourn, I think Vincent wants to discuss some audits. | 14 |
fomc | 2,004 | Yes. Just last night we received copies of the audit statement on the System open market account and the participation of the Reserve Banks. We'll be circulating those to you in a couple days, and we'll seek a notation vote. | 44 |
fomc | 2,004 | If there is no other business, we are adjourned. The next meeting is June 29-30, 2004. | 27 |
fomc | 2,004 | Good afternoon, everybody. At the outset, I would like to welcome President Yellen and President-elect Lacker to their first FOMC meeting in their new roles. Janet Yellen, as all of you know--or at least those of us on this side of the table--served on the Board from August '94 to February '97. Jeff Lacker has been on ... | 286 |
fomc | 2,004 | After one year! [Laughter] [Applause] | 13 |
fomc | 2,004 | Virgil always gets the last legal zing. [Laughter] It has been a long run; you've been here as General Counsel of the Committee for almost my full term, and it's getting long in the tooth also! Would somebody like to move approval of the minutes for the meeting of May 4? | 61 |
fomc | 2,004 | So move. | 3 |
fomc | 2,004 | I move approval. | 4 |
fomc | 2,004 | Approved without objection. We will now move to the special presentation on prospective external adjustments, and I call on Karen Johnson. | 24 |
fomc | 2,004 | 1 Thank you, Mr. Chairman. You should have a packet of charts labeled "U.S. External Adjustment" in front of you. Our topic today is U.S. external adjustment. The "adjustment" that is our focus starts with the recognition that the United States is running a large and growing deficit vis-a-vis the rest of the world in t... | 3,188 |
fomc | 2,004 | Your next exhibit considers the implications for both the U.S. and foreign economies of an abrupt depreciation of the dollar that could be associated with a disorderly adjustment. As described in the top left panel, we examine three scenarios that build on each other using the staff's FRB/Global model. We note at the o... | 2,238 |
fomc | 2,004 | 2 I will be referring to the separate package of exhibits that you should also have in front of you. My portion of this briefing on U.S. external adjustment focuses on the exchange rate and trade exposure of U.S. industries. Some scenarios for closing the U.S. trade deficit involve depreciations of the dollar exchange ... | 2,579 |
fomc | 2,004 | The last point that you made is particularly apt in the sense that we have a general tendency to evaluate these types of major adjustments in the context of historical relationships, and we don't think in innovative terms largely because innovations are very difficult to anticipate. Let me just say that overall these p... | 284 |
fomc | 2,004 | Let me start by mentioning the response of profits to exchange rate changes. First, at the industry level, if we use an aggregate trade-weighted exchange rate to look for the effects of exchange rates on profits of U.S. industries, we don't see anything that is statistically significant. If we use industry-specific wei... | 259 |
fomc | 2,004 | We do see that the goods imported into the United States in dollars from Western Europe show a far smaller inflation rate than would be implied by the one-to-one corresponding foreign exchange rate. That implies either a significant decline in profit margins for European exporters or a very substantial shorting in effe... | 125 |
fomc | 2,004 | Right. | 2 |
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