Monetary Policy Report

f 1993 , 'MONETARY POLICY . OBJECTIVES Summary Report of the Federal Reserve Board .... 1993 MONETARY POLICY OBJECTIVES This Executive Summary provides highlights of the Board's Review to the Congress on the Full Employment and Balanced Growth Act of 1978. Contents Section Page Testimony of Alan Greenspan Chairman, Federal Reserve Board 3 Recent Economic Developments and Monetary Policy in Perspective 4 Money and Credit in 1992 9 Ranges for Money and Credit for 1993 14 Economic Outlook for 1993 16 Supplemental Statement 19 Monetary Policy and the Economic Outlook for 1993 21 Monetary Objectives for 1993 21 Economic Projections for 1993 23 Monetary and Financial Developments in 1992 25 Testimony of Alan Greenspan Chairman, Federal Reserve Board Mr. Chairman and members Nevertheless, the expansion seemed to exhibit little momentum through much of the Committee, I appreciate of 1992, unemployment remained this opportunity to discuss high, and money and credit growth was sluggish. In response, the Federal with you developments in the Reserve took steps to increase the economy and the conduct of availability of bank reserves on several occasions. These actions brought monetary policy. Nineteen short-term interest rates to their ninety-two saw an improved lowest levels in thirty years. Long term interest rates also fell in 1992 and performance of our economy. early 1993 as inflation expectations The expansion firmed, and gradually moderated and optimism developed about a potential for inflation moderated. Some of genuine progress in reducing federal the structural impediments to budget deficits. Mr. Chairman, in the last few years growth seemed to diminish. In our economy has been held back by a particular, the financial variety of structural factors that have not been typical of post-World War II condition of households, firms, business cycles-certainly not occur and financial institutions ring all at once. These factors have included record debt burdens, over improved. In addition, building in commercial real estate, confidence rebounded late in and a substantial cutback in defense spending. In this we have not been the year. alone: Other major industrial countries also have been experiencing unusual impediments to growth, and by comparison the recent performance of the U.S. economy has been relatively good. Our monetary policy actions have been directed at facilitating adjustments to these developments and have in the process improved our economy's prospects for long-run sustainable growth. Significant hurdles, of course, still remain to be overcome in the short run. 3 Nonetheless, in the view of the vast Toa t these imbalances developed majority of business analysts, pros should not be entirely surprising. The pects appear reasonable for continued economy grew continuously for nearly economic expansion and further eight years-from late 1982 through declines in the unemployment rate. mid-1990, the longest peacetime The tasks of the monetary and fiscal expansion on record. In this unusual authorities alike will be not only to period of uninterrupted growth, support this prospective growth but unrealistic expectations of what the also to set policies to enhance the economy could deliver seem to have capacity of our economy to produce developed. In addition, households rising living standards over time. and businesses apparently were Before discussing the outlook in more skeptical that inflation would continue detail, I would like to reflect on how to decline and, based on their experi monetary policy has interacted with ence during the 1970s, may even have the forces that have shaped develop expected it to rebound. As a conse ments over recent years. quence, many may have shaped their investment decisions importantly on Recent Economic Developments expectations of inflation-induced and Monetary Policy appreciation of asset prices, rather in Perspective than on more fundamental economic considerations. In the commercial real I have often noted before this Com estate sector, assessments of profit mittee the distinctly different nature of potential formed during the first half the current business cycle. A number of the 1980s simply went too far, of extraordinary factors contributed to leading to an unavoidable period of the earlier weakening in the economy retrenchment. and have worked against a brisk and The difficulties faced by borrowers normal rebound from the recession. in servicing their debts as the expan Balance sheet restructuring has sion slowed and the levelling out or been, perhaps, the most important decline in asset prices prompted many of these factors. In the 1980s, debt to cut back expenditures and divert growth, hand in hand with rising asset abnormal proportions of their cash prices, considerably exceeded that flows to debt repayment. This in turn of income, and debt burdens rose fed back into slower economic growth. to record levels. Debt-financed In addition, financial institutions were construction in the commercial real faced with impaired equity positions estate market was an extreme mani owing to sizable loan losses as well as festation of this development, but it more stringent supervision and was apparent as well in other sectors regulation and demands by investors of the economy. and regulators for better capital ratios. 4 In response, they limited the availabil The contraction in defense spending ity of credit, with particular effects on has been a third development restrain smaller businesses. Over the last year ing the expansion. Real federal defense or so, however, considerable progress expenditures dropped about 6 percent has been made in strengthening in 1992, and are down 9 percent from balance sheets in both the nonfinancial their 1987 peak. Those regions of the and financial sectors. Moreover, by country with substantial defense some measures the rate of deteriora related activity have been among the tion of the commercial real-estate areas whose economies have per industry might be slowing and prices formed especially poorly. Although in this sector may soon begin to this development is having a contrac stabilize. Such developments should tionary influence on the economy in contribute to the sustainability of the the short run, over a longer period the expansion in the period ahead. productive resources freed in this Intensive business restructuring has process will find employment in the been another important characteristic private sector, contributing to capital of the evolving economic situation. In formation and the growth potential of an environment of weak demand and the economy. intense competition here and abroad, Another, less-discussed factor that many firms have found it necessary to contributed to the formulation of take aggressive measures to reduce our recent monetary policy dates not costs. These actions have included from the 1980s but rather from the selling or closing down unprofitable 1970s-inflation and inflation expec units and reducing their workforce. tations. Over the past decade or so, The process of restructuring has been the importance of the interactions of given added momentum by the monetary policy with these expecta availability of new computing and tions has become increasingly appar communication technologies. ent. The effects of policy on the Although these changes involve economy depend critically on how difficult adjustments in the short run, market participants react to actions they are producing important gains in taken by the Federal Reserve, as well productivity, which will boost real as on expectations of our future wages and living standards over time. actions. These expectations-and thus the credibility of monetary policy-are influenced not only by the statements and behavior of the Federal Reserve, but by those of the Congress and the Administration as well. 5 Through the first two decades of the At the first indication of an inflation post World War II period, this ary policy-monetary or fiscal interaction was patently less impor investors dump bonds, driving up tant. Savers and investors, firms and long-term interest rates. To guard households made economic and against unexpected losses, investors financial decisions based on an now demand a considerable premium implicit assumption that inflation over in bond yields-a premium that seems the long run would remain low out of proportion to the likely future enough to be inconsequential. There path of inflation, but one that never was a sense that our institutional theless conditions the environment structure and culture, unlike those of of monetary policy today. The steep many other nations of the world, were slope of the yield curve and the alien to inflation. As a consequence, expectations about future interest rates inflation premiums embodied in that it implies suggest that investors long-term interest rates were low and remain quite concerned about the effectively capped. Inflation expecta possibility of higher inflation over the tions were reasonably impervious to longer run, even as they appear less unexpected shifts in aggregate concerned about that possibility for demand or supply. In those circum the next year or two. stances, monetary policy had far more This heightened sensitivity affects room to maneuver; monetary policy, the way monetary policy interacts with for example, could ease aggressively the economy: An overly expansionary without igniting inflation expectations. monetary policy, or even its anticipa Even during the rise in inflation of tion, is embedded fairly soon in higher the late 1960s and 1970s there was a inflation expectations and nominal clear reluctance to believe that the bond yields. Producers incorporate inflation being experienced was other expected cost increases quickly into than transitory; it was presumed that their own prices, and eventually any inflation would eventually retreat to increase in output disappears as the 1 to 2 percent area that prevailed inflation rises and any initial decline during the 1950s and the first half of in long-term nominal interest rates the 1960s. Consequently, long-term is more than retraced. To be sure, a interest rates remained contained. stimulative monetary policy can But the dam eventually broke, and prompt a short-run acceleration of the huge losses suffered by bondhold economic activity. But the experience ers during the 1970s and early 1980s of the 1970s provided convincing sensitized them to the slightest sign, evidence that there is no lasting real or imagined, of rising inflation. tradeoff between inflation and unemployment; in the long run, higher inflation buys no increase in employment. 6 This view of the capabilities of Recognizing tendencies for the monetary policy is entirely consistent economy to slow, the Federal Reserve with the Humphrey-Hawkins Act. As began to ease monetary policy in the you know, the Act requires the Federal spring of 1989. In response to the Reserve to "maintain long-run growth downturn that began in August 1990, of the monetary and credit aggregates we accelerated the reduction in commensurate with the economy's short-term interest rates. Last year, we long-run potential to increase produc extended our earlier reductions in tion, so as to promote effectively the interest rates by lowering the federal goals of maximum employment, stable funds rate another percentage point prices, and moderate long-term through another cut in the discount interest rates." rate and injections of a large volume of The goal of moderate long-term reserves. In addition to reducing interest rates is particularly relevant in interest rates, the Federal Reserve the current circumstances, in which lowered reserve requirements last year balance sheet constraints have been for the second time in eighteen months a major-if not the major-drag on to help reduce depository institutions' the expansion. The halting, but costs and encourage lending. substantial, declines in intermediate Although the easing actions over the and long-term interest rates that have past few years have been purposely occurred over the past few years gradual, cumulatively they have been have been the single most important quite large. Short-term interest rates factor encouraging balance-sheet have been reduced since their 1989 restructuring by households and firms peak by nearly 7 percentage points; and fostering the very significant looked at differently, short rates have reductions in debt service burdens. been lowered by two-thirds. Some And monetary policy has played a have argued that monetary policy has crucial role in facilitating balance sheet been too cautious, that rates should adjustments-and thus enhancing the have been lowered more sharply or sustainability of the expansion-by in larger increments. easing in measured steps, gradually In my view, these arguments miss convincing investors that inflation was the crucial features of our current likely to remain subdued and fostering experience: the sensitivity of inflation the decline in longer-term interest expectations and the necessity to work rates. through structural imbalances in order That is the background against establish a basis for sustained growth. which we have conducted monetary In these circumstances, monetary policy for the last several years. policy clearly has a role to play in Through this period, Federal Reserve helping the economy to grow; policy was directed at fostering sustainable growth in the economy. 7 the process by which monetary policy Recent evidence suggests that our can contribute, however, has been approach to monetary policy in recent different in some respects than in past years has been appropriate and business cycles. Lower intermediate productive. Even by last July, when and long-term interest rates and I presented our midyear report to the inflation are essential to the structural Congress, some straws in the wind adjustments in our economy, and suggested that the easing of monetary monetary policy thus has given policy to that date and the various considerable weight to helping such financial adjustments underway in the rates move lower. economy were proving successful in Some have suggested that the paving the way for better economic decline in inflation permitted more performance. Households and aggressive moves and, had the businesses appeared to have made downward trajectory of short-term significant progress in shoring up interest rates been a bit steeper, that their balance sheets; considerable aggregate demand would have been reductions in debt servicing require appreciably stronger. I question that as ments had been achieved, equity had well. Basing this argument on the risen, and liquidity was higher. In the lower inflation that has occurred is a financial sector, bank profitability had non sequitur; the disinflation very improved, and a brisker flow of bank likely would not have occurred in the earnings as well as issuance of new context of an appreciably more equity shares and subordinated debt stimulative policy, and such a policy had bolstered capital ratios, helping to could have led to higher inflation in arrest the tightening of lending terms the next few years. Moreover, such a and standards. The lower level of policy would not have dealt funda interest rates, both short- and long mentally with the very real imbalances term, helped to limit the decline in in our economy that needed to be real estate values and boost the resolved before sustainable growth profitability of thrift institutions, as a could resume. And it would have run byproduct reducing the losses that the risk of aborting the process of would have been borne by the balance sheet adjustment before it was Resolution Trust Corporation and, completed. The credibility of noninfla ultimately, the taxpayer. tionary policies would have been strained, and longer-term interest rates likely would be higher, inhibiting the restructuring of balance sheets and reducing the odds on sustainable growth. 8 It is now apparent that our July Although the January CPI was expectation of a firmer trajectory surprisingly high, judging from survey of output has been borne out. GDP evidence and the behavior of long growth is estimated to have picked up term interest rates, inflation expecta to a 3½ percent rate during the second tions appear to be gradually diminish half of 1992, following a more modest ing, as market participants gain more increase in the first half. Beginning confidence that inflation is being in the late summer, some quickening contained. in the pace of auto sales could be detected, and spending on other Money and Credit in 1992 consumer durables strengthened as These favorable outcomes occurred well. Single-family housing starts despite slow growth of the money and rebounded. Industrial orders, produc credit aggregates. The Federal Open tion, and shipments all rose. In Market Committee had established association with this stronger trend, ranges of 2½ to 6½ percent for M2, payroll employment growth has 1 to 5 percent for M3, and 4½ to picked up and the unemployment rate 8½ percent for domestic nonfinancial has dropped back to 7.1 percent by sector debt. Over the year, M2 actually early this year-certainly too high, but rose 2 percent, M3 ½ percent, and debt well below the level at mid-year. For 4½ percent. Thus, both of the mone 1992 as a whole, real gross domestic tary aggregates finished the year about product is currently estimated to have ½ percentage point below their ranges, increased at about a 3 percent rate. and debt just at its lower bound. And indications are that the expansion Interpreting this slow growth was is continuing in the early months of one of the major challenges faced by 1993, though perhaps at a slightly the Federal Reserve last year. You may reduced rate. recall that, in establishing the ranges in The news on inflation in 1992 February and reviewing them in July, likewise was quite encouraging. the Committee took note of the The consumer price index rose just substantial uncertainties regarding the 3 percent in 1992, at the lower end relationships between income and of the central tendency of our July money in 1992. Although the velocity projections. Excluding volatile food of the broad monetary aggregates-the and energy prices, inflation last year ratio of nominal GDP to the quantity was the lowest in two decades. of money-had not changed much in 1991, that result itself was surprising. 9 In the past, when market interest rates What accounts for this unusual declined, as they had in 1991, savers behavior? Why is it that our financial shifted funds into M2, since deposit system was able to support 5½ percent rates usually did not fall as much as growth in nominal GDP with only market rates, and this produced a 2 percent growth in M2 and ½ percent decline in velocity, in contrast to what growth in M3? We can't be entirely occurred in 1991. As we moved into certain we have all the answers, but 1992, there appeared to be an appre certain elements of our evolving ciable likelihood that unusual weak financial picture clearly have played a ness in M2 growth relative to spending major role. The most important, would continue. But, in the absence of perhaps, was that savers believed they convincing evidence for increases in could earn considerably more on their velocity, the FOMC elected to leave funds if they were invested in some the ranges unchanged from the thing other than the deposits and previous year, noting that it would money market mutual funds that need to be flexible in assessing the make up M2. The unprecedented implications of monetary growth steepness of the yield curve was one relative to the ranges. factor contributing to the apparent rate In the event, nominal GDP was even disadvantage of M2 assets. The high stronger relative to the broad aggre level of long-term yields relative to gates in 1992 than seemed likely when shorter-term rates-rates on deposits, their ranges were established. Income in particular-has attracted funds increased 3½ percent faster than M2 from bank and thrift deposits into over the year and 4¾ percent faster alternative, longer-term investments. than M3. The unusual nature of these For example, bond and stock mutual increases in velocity can be illustrated funds, which are not included in our by noting that, prior to 1992, the standard monetary measures, flour velocity of M3 had risen more than ished in 1992. Assets in those funds, 3 percent in a year only once; the excluding institutional holdings and historical increases in M2 velocity IRA and Keogh accounts, increased comparable to last year's occurred $125 billion. In the absence of such solely in the context of sizable growth, a sizable proportion of the increases in market interest rates, additional shares doubtless would in contrast to last year's declines. have resided in deposits. Shifts from deposits to mutual funds have been abetted by the spread of facilities in banks and thrifts to sell mutual funds directly to their customers. 10 In addition, the high relative cost of The supplies of credit by deposi consumer debt, which has resulted tories also have been constrained. partly from the elimination of the tax Incentives to lend have been damped deductibility of consumer interest by market and regulatory pressures expenses, no doubt has prompted for depository institutions to increase households to use funds that other capital ratios, as well as by other wise would be held in M2 to pay off, factors raising their costs of intermedi or avoid taking on, consumer debt. ating credit, such as higher deposit Mortgage interest rates also are high insurance premiums, rising regulatory compared with interest rates on costs, and more stringent supervisory deposits, reflecting the steep yield oversight. As a result, banking and curve. This relationship has led some thrift institutions have sought to limit households to repay mortgage debt balance-sheet growth or actually to with funds that might otherwise be shrink. held in deposits. Together, these supply and demand Of course, if banks and thrifts had factors have accelerated a long been expanding their loan portfolios, standing process of rechannelling they would have had to bid more credit flows outside of depository vigorously for deposits. But a number institutions. With reduced needs to of developments damped growth of fund asset growth, banks and thrifts bank and thrift credit, and depositories have bid less vigorously for deposits, consequently have been prompt as can be observed in the very low to reduce rates on deposits. In the returns on such instruments. These business sector, the higher levels low yields, as I have noted, provide of stock and bond prices have encour incentives for depositors to redirect aged many corporations to pay down cash toward alternative investments bank debt with the proceeds of a large and repayment of debt. In addition, volume of bond and stock offerings. the proceeds of banking firms' More generally, the attitudes of offerings of equity shares and subordi households and firms toward debt and nated debt have substituted for banks' leverage appear to have changed deposit funding and have thus considerably in recent years, perhaps reduced monetary growth. in part mirroring revised expectations about prospects for inflation to ease debt burdens or reward leverage. 11 The adjustments in our depository As a result of such adaptations, the sector have significant implications for relationship between money and the overall operation of the financial the economy may be undergoing a system and the performance of the significant transformation. In contrast economy. Historically, banking to earlier work that suggested a stable institutions have played a critical role long-run relationship between M2 in financing small and medium-sized growth and inflation, recent develop businesses-firms that in the past have ments may indicate that the velocities been a key source of growth in the of the broader monetary aggregates economy. Some of the factors leading are moving toward higher trend levels. to the relative shrinkage of our It may be that the opening of securities banking industry, by limiting the markets to increasing numbers of availability of credit to smaller firms, borro.wers and lenders-in part have restrained aggregate demand and through securitization of loans by thus have significantly hindered the depositories as well as their offerings economic expansion. of mutual funds to deposit Nevertheless, the financial markets customers-is permanently shunting have shown a remarkable capacity to financing around depository institu adjust to the contraction of the tions. If this is true, the liabilities of depository sector in a way that mutes these institutions will not be as good a the impact on the overall economy. For gauge of financial conditions as they instance, despite a massive contraction once were. in the thrift industry since 1988, This is not to argue that money housing credit has remained readily growth can be ignored in formulating available and, in fact, relatively monetary policy. The Federal Reserve inexpensive as a result of the further in 1992 paid substantial attention to exploitation of financial innovations developments in the money supply, such as mortgage-related securities. and we will continue to do so in 1993 Similarly, open market sources of and beyond. Selecting ranges for funds have flourished in recent years, monetary growth over the coming allowing many firms to tap the stock year consistent with desired economic or bond markets to restructure their performance, however, is especially balance sheets. difficult when the relationship between money and income has become uncertain. Recent experience suggests that, at least for a time, measuring money against such ranges may lead to erroneous conclusions regarding the stance of monetary policy. 12 The shortfall of the aggregates from Recognition of these predictable their ranges and suggestions that the money-income relationships was the Federal Reserve should have been basis for the Federal Reserve' s more vigorous in preventing the increased emphasis on money in the shortfall have raised the general 1970s and the subsequent Humphrey question of the role of the ranges Hawkins legislation. And at the in conducting monetary policy. beginning of the 1980s, the Congress The annual ranges for money and passed the Monetary Control Act and credit growth can be useful in com the Federal Reserve adopted proce municating to the Congress and the dures to provide greater assurance public the Federal Reserve's plans for that targets for Ml could be achieved. monetary policy and their relationship But, even by the mid-1970s, the to the country's broader economic relationship of the monetary aggre objectives. Lowering the ranges gates to the economy was becoming during the 1980s, for instance, served more complex. Financial innovation as an important signal of the anti and deregulation significantly altered inflationary commitment of the the spectrum of available transaction Federal Reserve. and saving instruments. In the In some circumstances, the mone mid-1970s, advances in corporate cash tary aggregates can also be of value by management techniques, such as serving as indicators of the thrust of sweep accounts, reduced the need monetary policy. Deviations of money for business demand deposit balances growth from expectations may well for any given level of transactions. signal that policy is not having its And in the early 1980s, the widespread intended effect, and that adjustments availability of NOW accounts should be considered. Over much of transactions accounts that pay our nation's financial history a number interest-led households to treat their of measures of the money supply had checking accounts to some degree as reasonably predictable relationships savings instruments and to shift funds with aggregate income. The period in and out of such accounts mainly on of rapid financial change had not the basis of interest rate relationships. yet begun, and measuring money Such developments primarily affected was more straightforward. Ml. The FOMC made repeated adjustments to its Ml range to take account of changing velocity and soon after the mid-1980s had elimi nated its target for this aggregate. 13 Many of the shifts were captured The Humphrey-Hawkins Act, within the broader aggregates, but incorporating this view, does not adjustments to their ranges also had require that the ranges be attained in to be made from time to time. circumstances in which doing so In the last few years, the broader would not be consistent with achiev aggregates in turn have become much ing the more fundamental economic less reliable guides for the conduct of objectives. policy. Eventually, these measures may resume a more stable relationship Ranges for Money and Credit with the economy, or experience may for 1993 suggest useful new definition~ for t~e In establishing ranges for the mone aggregates. We are currently investi tary and credit aggregates in the gating several possible alterna~ive current year, the FOMC took into measures. But, in the meanwhile, the account the likelihood that many of FOMC necessarily has given less the factors that have acted in recent weight to monetary aggregates in the years to restrain money and credit conduct of policy and has relied on a growth relative to income w?uld broad range of indicators of future continue, though perhaps with financial and economic developments somewhat diminishing intensity. The and price pressures. And, in particular, yield curve could well remain steep, the FOMC judged in 1992 that more absent very marked progress in deficit determined efforts to push the reduction or a distinct break in aggregates into their ranges would not long-term inflation expectations, have been consistent with achieving which would tend to lower long-term the nation's longer-term objective interest rates. Banking and thrift of maximum sustainable economic institutions are unlikely to step up the growth. Indeed, had there been pace of balance-sheet expansion an attempt to force M2 and M3 sharply, and the large volume of . toward the middle of their ranges, securities they have accumulated m intermediate-and long-term rates by recent years will allow them to fund a now might have been significantly pickup in loan growth without as higher than they are currently, marked an acceleration of deposit threatening the durability of the growth. And households and fi~ms are expansion. . . expected to continue to be relatively This use of a broad range of md1ca cautious in their use of credit. Other tors is appropriate because achieve factors may add to tendencies for ment of the ranges for growth of money to expand more slowly than particular measures of money and income. For example, a resumption of credit is not, and should not be, the resolutions by the Resolution Trust objective of monetary policy. Rather, Corporation, which has been inactive the ranges are a means to an end. 14 for nearly a year, by shifting assets The necessity for a reduction in the from thrifts onto government balance monetary ranges at this time is wholly sheets, would tend to substitute technical in nature, and is a result of federal liabilities for those of thrift the forces that are altering the money institutions, reducing monetary income relationship. Consistent with growth. this view, the FOMC decided to Reflecting the expectation that maintain a range of 4½ to 8½ percent sluggish monetary growth will be for domestic nonfinancial sector debt, associated with sustainable expansion an aggregate whose relationship with in the economy, the Federal Open nominal GDP has been less distorted Market Committee has elected to in the last few years than that of the reduce the ranges for M2 and M3 for monetary aggregates. 1993 by one-half percentage point. For Significant uncertainties regarding M2, a range of 2 to 6 percent, mea the appropriate ranges for monetary sured as usual on a fourth-quarter-to growth remain. While we have made fourth-quarter basis, was established. some progress in understanding the A range of ½ to 4½ percent was behavior of the money and credit specified for M3. aggregates over the past year, to a As I have indicated in correspon degree this increased understanding dence with members of the Congress, has reinforced our appreciation the FOMC does not view the reduc of the complexity-and limited tions in the monetary ranges as predictability-of the economic and signalling a change in the stance of financial relationships that affect monetary policy. And most emphati money growth and its linkages with cally, these reductions do not indicate the economy. a desire on the part of the Federal These uncertainties imply that the Reserve to thwart the expansion. The relationship between money and Federal Reserve, to the contrary, is GDP growth could tum out signifi endeavoring to conduct monetary cantly different from what currently policy in a way that promotes sustain seems likely. Accordingly, the Federal able econo,r1!c expansion. The lower Reserve again will interpret the ing of these ranges does not imply any growth of money and credit relative to change in our fundamental objectives. their ranges in the context of other indicators of the financial system, the performance of the economy, and prices. Should recent trends affecting the money-income relationship continue, growth of the monetary aggregates in the lower portions of their ranges might be expected. 15 On the other hand, the upper ends of Sizable imbalances in commercial real the ranges provide ample room for estate remain, and a significant adequate monetary growth should rebound in this sector is doubtless demands for money relative to income several years off. Government spend come more into line with historical ing at the federal, state, and l<?cal patterns. In any event, until the levels is likely to remain constrained. relationship between the monetary A number of foreign nations are aggregates and spending returns to a confronting slow economic growth or more reliable basis, flexibility in the recession, which is likely to hold back interpretation of the aggregates demand for our exports. And it is relative to their new ranges is apparent from recent announcements required. by several large firms that corporate restructuring, involving significant Economic Outlook for 1993 cutbacks in operations and employ ment, is continuing. Several of the forces affecting relation Another very considerable uncer ships between money and income also tainty in the economic outlook is fiscal complicate the task of assessing the policy. The Congress and the Adminis economic outlook itself. For example, tration are considering both short-run the prospects for an easing of supply fiscal stimulus and steps to reduce the restrictions on credit from banks and deficit in the long run. Obviously, other intermediaries are difficult to government spending and taxes could assess, but any major change in this be affected by such measures in such a situation could have important way as to influence directly the overall implications for the economy. While economy this year, although the bulk banking institutions have become of any effect likely would occur in much more healthy and are well succeeding years. In addition, depend positioned to meet an increase in loan ing on the timing, dimensions, and demand, very few signals of any credibility of any fiscal measures, easing of terms or standards on market interest rates and stock prices business loans have been apparent could be affected appreciably, with to date. implications for private expenditures. In addition, other factors that While uncertainties thus remain, the hobbled the economy in the last economy appears to have entered the several years are likely to persist year with noticeable momentum to in 1993, though perhaps with dimin spending. In addition, inventories are ished intensity. Households and at relatively low levels, and factory business are likely to remain cautious orders have been rising. Consumer in using credit-a healthy develop confidence has recovered, and spend ment for sustained growth, but ing on durables and homes appears potentially continuing to constrain to be moving at a brisker pace. spending in the short run. 16 Recent surveys suggest an appreciable Conversely, periods of high and rising increase in business investment this inflation here and abroad have been year. characterized by financial instability, Against this background, members an excessive amount of resources of the Board and Federal Reserve Bank devoted to protecting financial wealth presidents project a further gain in rather than production of goods and economic activity in 1993. The central services, and substandard economic tendency of our projections is for real growth. GDP to increase at a 3 to 3¼ percent Over the past decade or so, our rate this year. Such an increase should nation has made very substantial result in a decline in the unemploy progress toward the achievement of ment rate, which would be expected to price stability, reversing a dangerous finish 1993 at a level of 6¾ to 7 per upward trend of inflation and infla cent. Inflation is expected to remain tionary expectations. Last year's low this year. 3¼ percent increase in the core CPI Containing, and over time eliminat was the lowest in twenty years and far ing, inflation is a key element in a lower than the debilitating double strategy to foster maximum sustain digit rates at the close of the 1970s. As able long-run growth of the economy. I have indicated to this Committee on As I have often emphasized, monetary numerous occasions, price stability policy, by achieving and maintaining does not require that measured price stability, can foster a stable inflation literally be zero, but rather is economic and financial environment achieved when inflation is low enough that is conducive to private economic that changes in the general price level planning, savings, investment, and are insignificant for economic and economic growth. It is no accident that financial planning. At current inflation the periods in our nation's history of rates, we are thus quite close to low inflation were the times when the attaining this goal. economy experienced high rates of Going forward, the strategy of private saving, investment, and hence monetary policy will be to provide productivity and economic growth. sufficient liquidity to support the When inflation is low, endeavors to economic expansion while containing boost profit margins necessarily inflationary pressures. The existing involve reductions in cost rather than slack implies that the economy can increasing prices; thus, low rates of grow more rapidly than potential GDP inflation tend to be associated with for a time, permitting further reduc relatively high productivity growth. tions in the unemployment rate even while inflation is contained. 17 Implementing this strategy, how The Federal Reserve, in formulating ever, will be challenging. Judging the monetary policy, certainly needs to level of potential output and its rate of take into account fiscal policy develop growth is difficult. Recent increases in ments. Of course, it is not possible for productivity have been unusually the Federal Reserve to specify in strong, given the moderate pace of advance what actions might be taken economic growth during much of the in the presence of particular fiscal expansion, and it is unclear whether policy strategies. Clearly, the course of these rates of productivity gain can be interest rates and financial market continued. In addition, the monetary conditions more generally will depend aggregates do not appear to be giving importantly on a host of forces-in reliable indications of economic addition to fiscal policy-affecting the developments and price pressures, and economy and prices. And the effects of numerous other uncertainties cloud fiscal policy on the economy in tum the particular features of the outlook. will depend importantly on the Monetary policy will have to adjust to credibility of long-run deficit reduction unexpected developments as they and the market reaction to any occur, taking into account a variety of package. The lower long-term interest economic and financial indicators. rates that resulted from a credible The contributions that monetary deficit-reduction plan would them policy can make to maximum sustain selves have an immediate positive able economic growth would be effect on the economy. In any event, complemented by a fiscal policy I can assure you of our shared goal for focused on long-term deficit reduction. the American economy-the greatest In the current environment, reducing possible increase in living standards the federal government's drain on for our citizens over time. scarce savings would take pressure off The last several years have been long-term interest rates, facilitating the difficult, and the economy is still readjustment of balance sheets and adjusting to structural imbalances that helping to promote capital formation have built up over recent decades. The and more robust economic growth near-term outlook, as always, is over the longer term. somewhat uncertain. But I believe that in many respects the inevitable painful adjustments have laid the foundation for better performance of our economy over the longer term. 18 Financial positions have been strength Time is no longer on our side. After ened; inflation is low and should declining through 1996, the current remain subdued; labor productivity is services deficit starts on an inexorable increasing; resources are being shifted upward path again. The deficit and the from national defense to investment mounting federal debt as a percent of and consumption. Nevertheless, the gross domestic product are corrosive challenges ahead for policymakers will forces slowly undermining the vitality be considerable. While continuing to of our free market system. be supportive of the expansion of our If we fail to resolve our structural economy over coming quarters, the deficit at this time, the next opportu monetary and fiscal authorities alike nity will doubtless confront us with need to structure our policies to enable still more difficult choices. How the our economy to reach its full potential deficit is reduced is very important, over time. that it be done, is crucial. In this regard, there are certain Supplemental Statement issues that I have discussed with this and other committees of the Congress The President is to be commended for over the years, which are worth placing on the table for active debate repeating. the issue of our burgeoning structural First, with current services outlays budget deficit, which will increasingly from 1997 and beyond rising faster threaten the stability of our economic than the tax base, stabilizing the deficit system if we continue to fail to address as a percent of nominal gross domestic it. Leaving aside the specific details, it product, not to mention a reduction, is a serious proposal, its baseline would require ever increasing tax economic assumptions are plausible, rates. Hence, there is no alternative to and it is a detailed program-by achieving much slower growth of program set of recommendations as outlays. This implies not only the need distinct from general goals. to make cuts now, but to control future It is obviously very difficult to get a spending impulses. I trust the Presi consensus on deficit cutting. If it were dent's endeavor to rein in medical easy it would have been done long costs will contribute importantly to ago. The debate among the nation's this goal. elected representatives will be pro Second, the hope that we can foundly political, in the best sense of possibly inflate or grow our way out of the word. As the nation's central the structural deficit is fanciful. bankers, our primary and professional Certainly greater inflation is not the concern is having the structural deficit answer; aside from its serious debili sharply reduced and soon. tating effects on our economic system, 19 higher inflation, given the explicit and The Federal Reserve recognizes that implicit indexing of receipts and it has an important role to play in this expenditures, would not reduce the regard. In formulating monetary deficit. As I indicated in testimony last policy, we certainly need to take into month to the Joint Economic Commit account fiscal policy developments. tee, there is a possibility that produc But it is not possible for the Federal tivity growth may be moving into a Reserve to specify in advance what faster long-term channel, boosting real actions might be taken in the presence growth over time. But even if that of particular fiscal policy strategies. turns out to be the case, it wouldn't by Clearly, the course of interest rates and itself resolve the basic long-term financial market conditions more imbalance in our budgetary accounts. generally will depend importantly on Finally, fear that the deficit reduc a host of forces-in addition to fiscal tion can be overdone and create a policy-affecting the economy and degree of "fiscal drag" that would prices. In any event, I can assure you significantly harm the economy, I find of our shared goal for the American misplaced. In our current political economy-the greatest possible environment, to presume that the increase in living standards for our Congress and the President would citizens over time. jointly cut too much from the deficit too soon is in the words of my predecessor "nothing I would lose sleep over.'' 20 Monetary Policy and the Economic Outlook for 1993 Monetary Objectives for 1993 At its February meeting, in review ing the ranges provisionally chosen for The aim of the Federal Open Market 1993, the Committee noted that Committee in 1993 is to promote nominal spending had accelerated financial conditions that will help to considerably in 1992 despite the quite maintain the greater momentum that sluggish growth of M2 and M3 the economy developed in 1992 and to throughout the year. The Committee consolidate the trend toward lower viewed this development as under inflation. The objectives for the scoring the importance that special, monetary aggregates in 1993 were set and historically anomalous, forces with that aim in mind. have had in restraining the growth of At its July 1992 meeting, the bro~d mo~ey relative to spending. Committee had provisionally chosen While the mtensity of some of these the same ranges for 1993 as it was forces might diminish in 1993, as confirming for 1992-2½ to 6½ percent borrowers and lenders achieve more for M2 and 1 to 5 percent for M3, with comfortable balance sheet positions, a monitoring range for the nonfinan they are unlikely to end. For example, cial debt aggregate of 4½ to 8½ per the substantial volume of liquid cent. At that time, the Committee securities on banks' balance sheets noted that the extent and duration of suggested that they will not become deviations of money growth from vigorous bidders for deposits in 1993 historical relationships remained even if, as expected, lending picks up. highly uncertain and that the actual !n addition, the yield curve, although setting, in February, of 1993 ranges 1t had begun to flatten a bit early in the consistent with the basic policy new year, is likely to continue to objectives would need to be made in provide savers an incentive to shift light of additional experience and funds out of monetary assets and into analysis. capital markets-a process facilitated by the growing availability of mutual Ranges of Growth of Monetary and funds at banks and thrifts. Credit Aggregates (Percentage change, fourth quarter to fourth quarter) 1991 1992 1993 M2 2½ to 6½ 2½ to 6½ 2 to 6 M3 ltoS ltoS ½to4½ Debt 4½ to 8½ 4½ to 8½ 4½ to 8½ 21 Given that these forces, and others, The Committee will continue to tending to channel funds around examine money growth as the year depository institutions and hence to unfolds for evidence on developing raise velocity-the ratio of nominal economic and financial conditions. As GDP to money-seem likely to persist in the past, the Federal Reserve will be in 1993, a downward adjustment to the guided also by a careful assessment of money ranges is appropriate to take a wide variety of other financial and account of the expected atypical economic indicators. The Committee's behavior of velocity: Lower money primary concern, as in 1992, will growth than normally expected would remain that of fostering financial be sufficient to support substantial conditions conducive to sustained growth in income. With this in mind, economic expansion and a noninfla the Committee made a technical tionary environment. downward adjustment in the target For debt growth, which has been growth ranges for M2 and M3, less damped by special forces than has reducing the upper and lower ends of the expansion of the broader monetary each range by ½ percentage point. aggregates, last year's range was The strength of the influences retained for 1993. Federal debt growth depressing money growth relative to again is likely to be substantial. income remains somewhat uncertain, Growth of the debt of nonfederal however. If they persist in 1993 to the sectors is expected to accelerate same extent as in 1992, growth of M2 somewhat as borrowers' balance and M3 in the lower portions of their sheets continue to improve, as reduced target ranges would be intermediaries become more willing to consistent with substantial further lend, and as the economy expands. growth of nominal spending. Alterna Nevertheless, the growth of nonfederal tively, the upper ends of the target debt is expected to remain below that ranges would accommodate ample of nominal GDP, a development the provision of liquidity to support Committee sees as contributing to further economic expansion even if the building the sound financial founda growth of money and income were to tion crucial to a sustained economic begin coming into more normal expansion. alignment, and the recent high rate of increase in velocity were to slow. 22 Economic Projections for 1993 The governors' and Bank presidents' forecasts of real GDP growth over the Although the economy and the four quarters of 1993 span a range of financial markets continue to face 2½ percent to 4 percent, with the difficult adjustments, the governors central tendency of the forecasts in a and Bank presidents think that the range of 3 to 3¼ percent. In consider most likely prospect for 1993 is that ing the possible outcomes for 1993, the economic growth will proceed at a governors and Bank presidents cited moderate pace. The growth of output the degree of momentum that appears probably will be supported by further to have developed in the economy in gains in productivity, the ultimate the latter part of 1992 and early 1993. source of increased real income and The various balance sheet problems improved living standards over the that apparently retarded growth of the long run. In addition, increases in economy during the early phases of employment are expected to be large the current expansion, while by no enough to bring further gradual means fully resolved, seem to be declines in the unemployment rate receding. In addition, sectors such as over the course of 1993. Inflation is residential construction, business expected to remain subdued, boding investment, and consumer durables well for sustained expansion in 1993 clearly are benefiting from the declines and beyond. that have occurred in interest rates. Economic Projections for 1993 1992 FOMC Members and Measure Actual Other FRB Presidents Range Central Tendency Percentage Nominal GDP 5.4 5¼ to 6¼ 5½ to6 change, fourth quarter Real GDP 2.9 2½ to4 3 to3¼ to fourth quarter: Consumer price index 1 3.1 2½ to3 2½ to2¾ Average level in the fourth Unemployment rate2 7.3 6½ to 7 6¾to7 quarter, percent: 1. CPI for all urban consumers. 2. Percentage of the civilian labor force. 23 However, impediments to more U.S. Real Merchandise Trade rapid expansion still are present. Annual rate, billions of 1987 dollars Government spending for defense appears likely to continue to decline 4 for some time to come. More broadly, Impor~ balance sheet repair and business -~------=-~----,=::---Q4 475 restructuring, which have exerted major restraint on economic activity in recent years, still are in process, / - · ·- 350 despite the apparent improvement in business finances in 1992. Indeed, the __:::::...._ ________ ______ 225 new year has brought additional announcements of business restructur ings in a variety of industries, both defense-related and other. These 1986 1988 1990 1992 changes are leading to an economy that is more productive and competi Despite the job cutbacks at some tive, but at the cost of some dislocation large companies, other firms, espe and disruption in the short run. The cially smaller ones, are adding to magnitude of structural changes like payrolls, albeit cautiously, and total these is a special uncertainty in the employment has been rising modestly. economic outlook for the remainder of The governors and Bank presidents the year. With regard to the external expect this pattern to persist, with net sector, many foreign industrial gains in employment during 1993 countries are experiencing prolonged likely to be sufficient to bring the economic weakness. Under the unemployment rate down somewhat circumstances, the growth of U.S. further over the course of the year. The exports, while remaining positive, may central tendency of the unemployment well fall short of the growth of imports rate forecasts for the fourth quarter of again in 1993, exerting a drag on real 1993 extends from 6¾ percent to GDP in contrast with the substantial 7 percent; the remaining forecasts of impetus in the period up to early 1991. the System officials range down to about 6½ percent. 24 The governors' and Bank presidents' Such action would encourage capital forecasts of the rise in the consumer investment and would go far toward price index over the four quarters of relieving anxieties that many of the 1993 extend from a low of 2½ percent nation's citizens still have about to a high of 3 percent. Within that longer-run economic prospects. range, a large majority of the forecasts are clustered in the span of 2½ to Monetary and Financial 2¾ percent. The considerable progress Developments in 1992 that has been made in bringing down Last July, when the Federal Reserve inflation during the past decade is Board presented its semiannual providing one of the essential under monetary policy report to the Con pinnings for the sustained growth of gress, there was considerable uncer real living standards over the long run. tainty about the prospects for the However, achieving a satisfactory economy in the second half of 1992. economic performance in 1993-and in After a promising start at the begin the years thereafter-will depe~d on ning of the year, growth of the initiatives in many types of policy economy had slowed once again in the other than monetary policy. In coming spring, and various structural adjust months, Congress and the new ments that had been impeding the Administration will be grappling with pace of the expansion retained . a host of issues, including those considerable force. However, with related to fiscal policy, regulatory drag from the structural adjustments policy and foreign trade policy. . expected to diminish gradually ~ve~ Far-sighted approaches are needed in time and with the economy continuing all those areas, if the economy is to to benefit from the substantial easing perform at its full potential over the. of money market conditions that the long haul. In framing regulatory policy System had implemented over the and foreign trade policy, Congress and years, the most likely prospect for the the Administration will need to keep economy was thought to be one of an eye on potential costs and rigidities moderate growth in the second half of that could sap the vigor of a market the year. economy. With regard to fiscal policy, credible action to reduce the prospec tive size of future federal budget deficits could yield a very direct and meaningful payoff in the form of lower long-term interest rates than otherwise would prevail. 25 In the event, economic growth did Civilian Unemployment Rate indeed proceed at an improved pace in Percent the second half of 1992, although the pickup did not start to become evident in the incoming economic data until r --------------8 well into the autumn. Fueled by strong increases in household and business ~ spending, real gross domestic product 6 rose at an annual rate of 3.6 percent in the second half of the year. The increase over the four quarters of the --------------4 year amounted to 2.9 percent. This was the largest gain in output since 1988, and, while far from robust by the standards of past cyclical upswings 1986 1988 1990 1992 in activity, it was a much stronger performance than many analysts Employment has grown since the inside and outside of government middle of last year, but at only a had thought likely, given the extraor gradual pace. Hiring has been damped dinary headwinds with which the by the ability of firms to meet their economy had to contend. Indeed, the output objectives through hefty performance of the U.S. economy increases in productivity. The unem stands in sharp contrast to that of a ployment rate,. which had risen in the number of major foreign industrial first half of 1992 in conjunction with a economies that appear still to be labor surge in the share of the working-age ing to regain forward momentum. population in the labor force, turned down thereafter as labor force partici Real GDP pation fell back. The unemployment Percent change, annual rate rate in January of this year was 7.1 percent, more than half a percent age point below the peak rate of last -~z.1-----------+:,:,;~....+--- 2 summer. + _ ____t1:...l..___w.;_L--..J.;::;u_...,.......----.--,--~---1..i,;;J.._J~-- 0 ------~-------- 2 1989 1990 1991 1992 26 Consumer Prices* The hesitant pace of the economy Percent change, Q4 to Q4 evident in incoming information ~-------------- throughout much of last year, along with notable weakness in the mone tary and credit aggregates and steady 6 gains against inflation, prompted the Federal Reserve to ease monetary conditions three times, bringing 4 short-term rates down by another full percentage point over the year. The discount rate was reduced to three 2 percent and short-term rates generally are now at their lowest levels since the early 1960s. Long-term rates also fell, on balance. 1986 1988 1990 1992 Declines were limited at times, *Consumer price index for all urban consumers. however, by concerns about prospec Price developments remained tive federal budget deficits and about favorable in the second half of 1992, the possibility that inflation might and the rise in the consumer price begin to move higher as the expansion index over the four quarters of the proceeded. Notable decreases in long year amounted to 3 percent, matching rates were registered in late 1992 and the low rate achieved in the previous early 1993, as inflation remained year. Consumer energy prices turned subdued and as statements by back up in 1992, but the prices of other goods and services that enter into the Long-Tenn Interest Rates CPI generally rose less rapidly than Percent they had in 1991. Although the CPI Monthly spurted ½ percent this past month, the --------------- 18 underlying trends in labor costs and prices remain encouraging. The success to date in keeping inflation in check, while restoring growth, has had highly salutary effects on financial markets and on the process of financial reconstruction, the continuing progress of which is essential to the Thirty-year achievement of renewed and sustain Treasury bond able prosperity. 1982 1984 1986 1988 1990 1992 Last observation is for first two weeks of February 1993. 27 Administration officials suggested that below the 2½ percent lower end of its they would seek only limited near target range. M3 also came in under its term fiscal stimulus and that proposals 1 to 5 percent target range, growing to make substantial cuts in the federal only .5 percent. The Federal Reserve budget deficit over time were under did not make greater efforts to boost serious consideration. The trade growth to within these ranges because, weighted foreign exchange value of as the year went on, it became increas the dollar in terms of the other ingly clear that slow growth of the Group-of-Ten currencies appreciated broad money aggregates did not on balance over the course of 1992 and indicate that financial market condi rose further during the first weeks of tions were impeding the expansion of 1993. The dollar benefited from the spending and income. In fact, growth improved performance of the U.S. of nominal GDP exceeded that of M2 economy relative to conditions in by 3½ percentage points last year and other industrial countries. that of M3 by 4¾ percentage points. Growth of the monetary aggregates Not only did data on spending itself slowed last year despite an accelera show a firming trend over the year, tion in nominal spending and income. but narrow money (Ml) and reserves For the year, M2 advanced 1.9 percent, were expanding rapidly-suggesting to some that liquidity was quite Foreign Exchange Value ample-and the growth of debt, while of the U.S. Dollar* restrained, was considerably in excess Index, March 1973 = 100 of that of the broader monetary aggregates. Nominal GDP growth last year, which picked up to 5.4 percent from 3.5 percent in 1991, was fueled by spending that was financed largely outside of banks and other deposito ries, whose liabilities constitute the lion's share of the monetary aggre gates. Spurred in part by advances in -------------- 75 equity prices and by declines in longer-term interest rates, businesses and households strengthened their balance sheets by raising funds in 1986 1988 1990 1992 "Index of wei$hted average foreign exchange value of U.S. dollar m terms of currencies of other G-10 countries. Weights are based on 1972-76 global trade of each of the 10 countries. 28 bond, mortgage, and equity markets, progress for the last couple of years, and repaying bank loans and other has helped to redress financial short-term debt. This shift in the focus distortions that accompanied the of financing efforts toward the capital buildup of debt and the rapid rise in markets, a process which has been in some asset prices in the 1980s. Growth of Money and Debt (Percent Change) Debt of Domestic Ml M2 M3 Nonfinancial Sectors Fourth quarter to 1980 7.4 8.9 9.5 9.5 fourth quarter 1981 5.4 (2.5)* 9.3 12.3 10.0 1982 8.8 9.1 9.9 9.3 1983 10.4 12.2 9.9 11.4 1984 5.5 8.1 10.8 14.3 1985 12.0 8.7 7.6 13.8 1986 15.5 9.3 8.9 14.0 1987 6.3 4.3 5.8 10.1 1988 4.3 5.3 6.4 9.2 1989 0.6 4.7 3.7 8.1 1990 4.3 4.0 1.8 6.9 1991 8.0 2.8 1.1 4.3 1992 14.3 1.9 0.5 4.6 Quarterly growth Ql 15.5 3.3 2.0 4.3 rates 1992 (annual rate) Q2 10.6 0.6 -0.3 5.4 Q3 11.6 0.8 0.1 4.2 Q4 16.8 2.9 0.2 4.2 *Figure in parentheses is adjusted for shifts to NOW accounts in 1981. 29 The low level of credit demanded Although growth of M2 and M3 was from depositories has meant that these very weak last year, Ml accelerated to institutions have not needed to seek 14.3 percent, the second fastest annual large volumes of deposits. As a increase recorded in the official series, consequence, rates paid on deposits which begins in 1959. In part, this have been adjusted downward rapidly pickup owed to the expansion of as short-term market rates have spending, but it mainly reflected the declined. Savers, reacting to the lower tendency for rates on liquid deposits deposit rates and to attractive returns to adjust downward less rapidly than on bonds and equity, have shifted those on time deposits. In response, funds from M2 deposits into the savers shifted substantial volumes capital markets. One method savers of funds from maturing time deposits have used to capture these higher to NOW accounts. In addition, busi capital market yields has been through nesses boosted their demand deposits purchases of bond and stock mutual substantially. To support this growth funds, which are not included in the in transactions deposits, the Federal monetary aggregates, and which Reserve added substantial volumes together experienced record inflows in of reserves in 1992. Total reserves 1992. Moreover, consumer loan rates increased 20 p~rcent last year, and the have fallen by less than deposit rates, monetary base, which includes and households appear to be using M2 currency outstanding as well as assets to repay consumer debt or reserves, increased 10.5 percent, the restrain its growth. The combination of highest rate ever registered in the rate incentives, desires to strengthen official series. balance sheets, and the greater Decisions to strengthen balance availability at low transaction cost of a sheets had a smaller but significant broadened array of savings vehicles effect on debt growth. The debt of beyond traditional deposits appear to nonfinancial sectors is estimated to have distorted, at least for a time, the have expanded 4.6 percent, only traditional relationship between levels slightly faster than in 1991 and just of M2 and M3 assets and given levels above the lower end of its monitoring of spending. range. With debt growing less rapidly than income and with declines in market interest rates allowing higher cost debt to be rolled over at lower rates, households and businesses made substantial further progress in reduc ing debt service burdens. FRBl--44000--0293 30

Federal Reserve (1993, February 18). Monetary Policy Report. Monetary Policy Reports, Federal Reserve. https://whenthefedspeaks.com/doc/monetary_policy_report_19930219

@misc{wtfs_monetary_policy_report_19930219,
  author = {Federal Reserve},
  title = {Monetary Policy Report},
  year = {1993},
  month = {Feb},
  howpublished = {Monetary Policy Reports, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/monetary_policy_report_19930219},
  note = {Retrieved via When the Fed Speaks corpus}
}