Regional President Speech

Silas Keehn - Introductory Comments Ag Advisory Council, Sept. 11, 1987 I. -- ~le£....~ »-rJ ~ - Welcome (-!!- N~ ~~ A. Happy to welcome you all back today for the second meeting of this group B. Should start off by reintroducing myself and my associates l. Karl Scheld 2. Jim Morrison 3. Nancy Goodman C. Also want to introduce Peter Heffernan, agricultural economist with our Bank. Some of you may be familiar with Peter through his frequent articles appearing in our Agricultural Letter. D. Special welcome this morning to 2 members of Council not able to be with us in March l. Jerry King from Illinois 2. Gerald Elenbaum from Michigan ~ ~$/J'A/ ~ -xc,wAE. Very pleased that the entire Council could be here today Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1. Looking forward to hearing from each and every one of you this morning a. Today's meeting largely designed so that those of us from the Federal Reserve can hear your views 2. Shortly I'll be looking to each of you to comment on the agricultural outlook from your individual perspective 3. I'm particularly anxious to hear what you have to say in the hopes that the news will be relatively good F. Also this morning, Karl will be presenting his outlook for the national economy, and I know his news will be good G. And even later, Jim Morrison will be talking about banking conditions, and believe me it's the first time in years that I can expect to hear some cheerful words from Jim 1. Hopefully his comments on trends at the District's agricultural banks will be fairly positive compared to what we've been through 2. I think were he to comment on conditions at the larger banks, he would also suggest that developments have been favorable as recent additions to loan loss reserves have put these institutions on a better footing II. Against this positive background, I guess it's up to me to be the bearer of the news that's not as good A. In fact, the main items that concern me - the clouds that hang over this rather bright landscape - are hardly news at all 1. I'm referring to our twin deficits - the budget deficit and our trade deficit 2. One of the things that's so troubling about these deficits is that they're hardly new issues but still very persistent B. Budget deficit Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1. outlook for current year is good - about $60 billion reduction predicted from FY86 2. But a one-time bonus due to Tax Reform Act a. Without fiscal policy changes, deficit will climb 3. These levels of deficit spending are unprecedented for this point in an economic expansion a. Adds to aggregate spending b. Provides pressure on interest rates c. Less savings available for private investment d. Continued heavy reliance on savings from abroad c. Trade deficit is other side of this coin 1. It, too, has been stubborn - hard to reduce a. Lower dollar should begin to improve our trade balance soon and there is some indication that we will soon see some evidence that this is happening b. But the near term impact of the lower . dollar is more likely to be reflected in higher prices c. Lower dollar also has some implications for our ability to continue to attract funds needed to finance our budget deficit III. Current policy considerations A. These factors underlie recent monetary policy actions, specifically the increase in the discount rate. B. Perennial challenge for monetary policy to achieve economic growth within an environment of price stability C. Goal is to avoid the experience of the early 1980s where the corrective actions required were so painful, particularly for agriculture 1. I feel we learned our lessons well from that experience 2. Also have the Fed leadership needed to pursue that goal D. I'd like to turn the program now to Karl ... Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 

Silas Keehn (1987, September 10). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_19870911_silas_keehn

@misc{wtfs_regional_speeche_19870911_silas_keehn,
  author = {Silas Keehn},
  title = {Regional President Speech},
  year = {1987},
  month = {Sep},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_19870911_silas_keehn},
  note = {Retrieved via When the Fed Speaks corpus}
}