speeches · July 19, 1988
Regional President Speech
Silas Keehn · President
The Economy
and
Monetary Policy
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A-1
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Federal Reserve Bank of St. Louis
Current Economic Conditions
and the Economic Outlook
for the United States
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A-2
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Federal Reserve Bank of St. Louis
GNP - the output of goods and services
- ~ ~ -
trillions of 1982 dollars
4.2
- (Jtb
v~ -
4.0 ~;~
3.8
3.6
3.4
3.2
3.0
2.8
1978 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88*
*First quarter of 1988 at an annual rate.
A-3
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Industrial production ~ ~
- .J
u ~ ,
Ul.J),~ ~ ,
,a: ~ '
index, 1977= 100
- ~ ~~ -~Pcrir
140
c.J-t-< ~..LJl/
I
135
130
125
120
115
110
105
100
1978 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88*
*A verage for first five months of 1988.
A-4
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Payroll employment - /t:J ~ ~ '4 ~ -~ >-e- -<
millions of employees _:;r-r,
"N-._ •
110 -- '( -U--\.....!)..)/
105
100
95
90
85
80
1978 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88*
• Average for first five months of 1988.
A-5
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Disposable personal income _
w ~
: r ) ~
trilions of 1982 dollars
4.0
3.5
3.0
2.5
2.0
1.5
1.0
1978 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88*
• Average for first five months of 1988 at an annual rate.
A-6
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-
Export and import activity
billions of 1982 dollars
700
Imports
600
500
400 -
300
200
100
Net exports
0
-100
-200
1983 1984 1985 1986 1987 1988*
*First quarter of 1988 at an annual rate.
A-7
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Relative trade improvement
index, 198501=100
140
130
✓
Imports ✓
✓
✓
;
120 ;
;
✓
✓ Exports
✓
;
110 ;
;
.,,,,
;
.,,,, .,,,,
.,,,, .,,,,
100
90
1985 1986 1987 1988
A-8
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Consumer goods imports
billions of dollars
100
---
90 ----
✓----
/ Current dollars
----✓
;;
80
/
/
/
/
; ; ✓ 1982 dollars
70
~
60
50
1985 1986 1987 1988
A-9
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
~ s ~ ~
·c:__
Durable goods exports
index, 198601 = 100
170
160
150 Electrical . ••
equipment .••
•
• Total
• ••
140
•••
••
.• • - - . -ts~b
•
•
130 ✓
• ✓
•
• ✓
•
• ✓
120 • ; ✓
••
• • • __ ; Industrial---------
•••••
• • machinery l ~ N ~~-
110 •
•
• ~~ G--.N/.P -
•
100
90
1986 1987 1988
A-10
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Nondurable goods exports
index, 198601=100
170
160
1
150 Paper and
1
paperboard 1
- I
140 ---------J
~
I
130 ✓' Chemicals
Total
✓
;
;
120 ;
_;
,.-- ---
110 Pharmaceuticals
✓
100
90
1986 1987 1988
A-11
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
f
2
~ 06 ~
Personal consumption expenditures 5 '.r G-
N
trillions of 1982 dollars
2.6
2.4
2.2
2.0
percent change
5.0
2.5
0
1983 1984 1985 1986 1987 1988*
*First quarter of 1988 at an annual rate.
A-12
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
~t -1
~ 6' s~l/o
Resource utilization '~ ._, 7
~ ~ ~ fI/
percent --{)~ LJLU ~
90
Industrial capacity ,?,--~ - ~ ~rou:,_,
85
--it!-~
--------......--~
80 ~
75 .,-----
('t~
70
f l ~
65
1978 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 ~ ~ ~
percent
Unemployment rate
10
8
6
4
2
0
1978 '79 '80 '81 '82 '83
*A verage for first five months of 1988.
A-13
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Price performance
I ' , '
percent change (annual rate) I
I
I I
! .
8
6
CPI - fu
+ <-f
4
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/'
2 I \
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✓
\ ✓ \ " '"
0
I
-~l'-f--'i~
I
I
-2
I
I
~s~~
I, _,
-4
I I
-6
1983 1984 1985 1986 1987 1988
A-14
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Manufacturing growth
index, January 1983=100
150
140
Industrial production
(manufacturing)
130
120
Payroll employment
(manufacturing)
110
100
90
1983 1984 1985 1986 1987 1988
A-15
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Looking Ahead _UJvJ
~
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Private demand
°' -
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,; Personal consumption c..vi.vt:,·wi... 0
. ~(.I\,.(
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Investment ~s
I \ ~
Foreign trade 1<~
Government demand
A-16
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Federal Reserve Bank of St. Louis
d-f
Personal consumption expenditures 1 MJ 6
6--f\J I)·
percent change
6
5
~~
.s
~ ~ ~ c..P" ., ~.J
t &.e
4
3
-
2
1
0
1983 1984 1985 1986 1987 1988 1989
A-17
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Investment - - ~ i ~ - ~
~~~
percent change
15
-, I/
1/1,;rv
I
10
Business fixed
~
Residential
5
no
change
0
-
/
-5
I
-10
-15
1985 1986 1987 1988 1989
A-18
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Export and import activity
billions of 1982 dollars
700
600 Imports I ■ I I I I I I I I I ■
••••••
• ••
•••
• • •
500 ••
• •
-· ••
• • •
- ----
-- -
400 ---- - ----
Exports
300
200
100
Net exports
0
-100
-200
1983 1984 1985 1986 1987 1988 1989
A-19
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Government purchases of goods and services
billions of 1982 dollars
500 .. -
State and local
----
-- -- ---
450
----
400
350
300
250
1983 1984 1985 1986 1987 1988 1989
A-20
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
GNP - output of goods and services
percent change in real GNP
8
7
6
5
4
3
2
1
0
A-21
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Prices
percent change in CPI
7
6
5
4
3
2
0
1983 1984 1985 1986 1987 1988 1989
A-22
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
The Challenges
for
Monetary Policy
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8-1
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Federal Reserve Bank of St. Louis
Globalization of U.S. economy
• Trade flows
• Financial flows
• Policy coordination
B-2
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Leveraging of America
• Rapid government debt growth
• High consumer debt-to-income
• High corporate debt-to-net worth
• Net debtor nation
B-3
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
ca-;y
~ ~ ~
L___
....--...c.:.;c
Major economic imbalances
• International trade
• Federal budget
B-4
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
International Trade Imbalance
B-5
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
U.S. current account balance
billions of dollars
200
100
0
-100
•
-200
1960 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88*
•Rrst quarter of 1988 at an annual rate.
B-6
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
U.S. current account balance vs. foreign capital inflows
billions of dollars
200
, --
,--
,
Net foreign capital inflow ,
100
I
I
I
,
I
-------
0
o/
~ ~~J ~
,,-
r
01--~ -.Jr- -
~~LtU ~rev
-100
Current account balance
-200
1960 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88*
*First quarter of 1988 at an annual rate.
B-7
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Net international investment position of U.S.
billions of dollars
200
100
0
-100
-200
-300
-400
-500
1978 '79 '80 '81 '82 '83 '84 '85 '86 '87*
•estimate.
B-8
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
~~~
,....--;w-:?
U.S. balance on goods and services 6 tW. v, ·~ •" -/-;. - r
A---i--r
,Q,~~ -
~ '-'1.J,-(.UCJA L.FT,
billions of dollars
50
\
0
Total
-50 Goods
-100
-150
-200
1960 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88*
*First quarter of 1988 at an annual rate.
B-9
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
U.S. net exports: real vs. nominal
billions of dollars
50
0
-50
Nominal
-100
-150
-200
1982 1983 1984 1985 1986 1987 1988
B-10
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Federal Budget Imbalance
B-11
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Federal deficit
percent of GNP
8
6
&>'<f
~S.(1
IQ
~ ~
- 1.:)-dU bl/
4
~ - lfjo
2
0
I
-2
1960 '64 '68 '72 '76 '80 '84 '88
B-12
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Gross public debt of U.S. Treasury
trillions of dollars
3.0
2.5
2.0
1.5
'1 6 oo ~~·11-0W
1.0
~ 3 ~:II,
'e;"-;y
0.5
0.0
1972 '74 '76 '78 '80 '82 '84 '86 '88
B-13
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Total interest on debt
percent of budget outlays
22
20
18
16
~ t
14
~<:..h.
12
10
8
1976 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87
fiscal year
B-14
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Uses of total net available savings
percent of GNP
12
10
8
Private
6 domestic
investment
4
2 Federal
deficit
0
-2
1970 '72 '74 '76 '78 80 '82 '84 86 '88*
*First quarter of 1988 at an annual rate.
B-15
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Sources ot total net available savings
percent of GNP
12
10
8
Domestic
savings c:J/
roo
---/-6
6
4
Savings
2 from //c) <I"
-r
abroad bt>
0
-2
1970 '72 '74 '76 '78 '80 '82 '84 86 '88* ~
•First quarter of 1988 at an annual rate.
B-16 ~ I
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Domestic savings and investment
percent of GNP
10
Domestic savings
8
l
Private domestic investment
i
6
4
2
0
1982 1983 1984 1985 1986 1987 1988*
*First quarter of 1988 at an annual rate.
B-17
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Personal savings
percent of disposable personal income
12
,,,.,?
~~c..t
10
/2--(,.
'-f I
8
6
4
2
0
1960 '64 '68 '72 '76 '80 '84 '88
NOTE: Horizontal line represents the average value from 1960 to1981.
B-18
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
~~~
~ ~. 'l~
( ,,
d-0
~
'-t; 't--0
Consumer installment debt I
.
-~~
percent of disposable personal income
20
18
16
14
12
10
1960 '64 '68 '72 '76 '80 '84 '88
B-19
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Net funds raised by nonfinancial corporate business
billions of dollars
200
150
Debt instruments
100
50
------------..._
0
\
Net equity issues
\
\
-50
\
\ --------"',
-100
1970 '72 '74 '76 '78 '80 '82 '84 '86 '88*
*First quarter of 1988 at an annual rate.
B-20
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Corporate debt to net worth ratio
percent
100
90
80
70
60
50
1971 '73 '75 '77 '79 '81 '83 '85 '87
NOTE: Net worth measured on historical cost basis.
B-21
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Policy Implications
~05V~~,s.......___
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to
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c & ~
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/~r7,--t,_-~
--------
t ~
'µ ,Pr.Ji/I~ o,.s •
B-22
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Federal Reserve Bank of St. Louis
v(A_u~r ~ ~ ~
w
~ ~ ~-Ti ~~
~ ~ p ~·,
Federal budget deficit outlook
~~~ ~ rtv
billions of dollars
~ ~ ~ I' ~
,;--I}',·-,
250
°/
C,.. ~j D /J-,\.)V,•~ ,...., ,._j,
200
CBO
150
100
50
0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989*
fiscal year
• Assuming President's fiscal 1989 budget is adopted.
Digitized for FRASER B-23
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Domestic spending vs. output
gross domestic purchases as a percent of GNP
103
102
101
100
99
98
97
1966 '68 '70 '72 '7 4 '76 '78 '80 '82 '84 '86 '88*
•First quarter of 1988 at an annual rate.
B-24
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
t"' Cf
~
C¼!--°'-- - ~.JL--yqUN~foLl{),~
Fo~~~
~
- (J.J- , , ~ -
Trade weighted dollar ~~-
ryf
'-1..../ :)/ M >
index, March 1973= 100
175
150
125
100
75
1973 '74 '75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88
B-25
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Gross foreign capital inflow
billions of dollars
250
200
150
Private
100
50
Official
0
-50
1981 1982 1983 1984 1985 1986 1987
B-26
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Domestic Policy Goals
Economic growth with price stability
8-27
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Real GNP: actual vs. trend
trillions of 1982 dollars
5.0
4.5
4.0
3.5
1967-1988 trend
~
3.0
2.5
2.0
1.5
1.0
0.5
1948 '52 '56 '60 '64 '68 '72 '76 '80 '84 '88
B-28
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Consumer prices
percent change from year ago
16
14
12
10
8
6
4
2
0
1960 '64 '68 '72 '76 '80 '84 '88
B-29
Digitized for FRASER
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
7/5/88
Polic_y Remarks
Page 34
Slide #30 -- FRB Chicago Logo
XXX. Concluding Remarks
A. Tried to show
1. Economic environment very different
a. Globilization / buildup of debt
b. Imbalances
2. Record good
a. Economic results excellent
b. Inflation - higher - but not unreasonable
c. Challenge - maintain growth rate - but don't let
inflation rise to an unacceptable level
Every expectation we'll continue this record
• • • • •
~ ~
Digitized for FRASER
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Federal Reserve Bank of St. Louis
Cite this document
APA
Silas Keehn (1988, July 19). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_19880720_silas_keehn
BibTeX
@misc{wtfs_regional_speeche_19880720_silas_keehn,
author = {Silas Keehn},
title = {Regional President Speech},
year = {1988},
month = {Jul},
howpublished = {Speeches, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/regional_speeche_19880720_silas_keehn},
note = {Retrieved via When the Fed Speaks corpus}
}