FOMC/FOMC20050630meeting/FOMC20050630meeting--419.txt MS. DANKER Nonetheless , the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability . '' '' FOMC/FOMC20050630meeting/FOMC20050630meeting--85.txt MS. YELLEN One view that I think is very prevalent is that the use of credit in the form of piggyback loans , interest-only mortgages , option ARMs -LSB- adjustable-rate mortgages -RSB- , and so forth , involves financial innovations that are feeding a kind of unsustainable bubble . FOMC/FOMC20050630meeting/FOMC20050630meeting--85.txt MS. YELLEN Those mortgages have an 80 percent loan-to-value ratio and I suppose they are being sold off to June 29-30 , 2005 37 of 234 and Freddie , there 's no need for private mortgage insurance . FOMC/FOMC20050630meeting/FOMC20050630meeting--11.txt MR. RUDEBUSCH 9 , MR. RUDEBUSCH. , '' I will review some general issues related to monetary policy and asset prices . FOMC/FOMC20050630meeting/FOMC20050630meeting--11.txt MR. RUDEBUSCH Also , during that time , the possible capital misallocation from the run-up in prices and the possible financial instability that might have followed a bursting of the bubble may have appeared difficult to rectify . FOMC/FOMC20050630meeting/FOMC20050630meeting--10.txt MR. PEACH As shown in exhibit 6 , the American Housing Survey -LRB- AHS -RRB- data suggest that both appreciation rates and turnover rates increase as one moves out the home value distribution . FOMC/FOMC20050630meeting/FOMC20050630meeting--60.txt MR. GRAMLICH 58 , MR. GRAMLICH. , '' So if we see house prices going up , we 're in effect cutting the funds rate while the house prices are going up ? '' FOMC/FOMC20050809meeting/FOMC20050809meeting--169.txt MR. MADIGAN To offset the incipient upward pressure on bond yields arising from the increased term premium , the Committee eases policy considerably relative to baseline . FOMC/FOMC20050809meeting/FOMC20050809meeting--169.txt MR. MADIGAN As indicated in the upper part of the lower panel , the range of model estimates has narrowed substantially this round . FOMC/FOMC20050809meeting/FOMC20050809meeting--169.txt MR. MADIGAN To move more rapidly to close the real rate gap , this alternative would raise the funds rate 50 basis points at this meeting . FOMC/FOMC20050809meeting/FOMC20050809meeting--169.txt MR. MADIGAN And the second scenario in particular suggests the potential value to policymakers of being able to decompose changes in nominal bond yields into expectation and term-premium components . FOMC/FOMC20050809meeting/FOMC20050809meeting--169.txt MR. MADIGAN Moreover , the statement would convey fairly serious concern about both the strength of aggregate demand and rising cost pressures . FOMC/FOMC20050630meeting/FOMC20050630meeting--166.txt MR. KOHN As to this idea that perhaps prices are getting too high relative to rents , I 'd argue that they 're going to come back in line . FOMC/FOMC20050809meeting/FOMC20050809meeting--143.txt MR. STERN As far as the national economy is concerned , we 're now almost four years into the current economic expansion and , overall , things look quite good to me . FOMC/FOMC20050809meeting/FOMC20050809meeting--143.txt MR. STERN I call it promising not because I 'm thinking about Europe or Japan , but because I 'm thinking about China and India and some of their smaller brethren . FOMC/FOMC20051213meeting/FOMC20051213meeting--86.txt MR. KOHN Such a slowing is a critical element behind the moderation in growth next year in the staff forecast , and I suspect in the market 's assessment as well . FOMC/FOMC20051213meeting/FOMC20051213meeting--86.txt MR. KOHN Added demand and rising equity prices have provoked little , if any , offsetting tightening in financial conditions in credit markets . FOMC/FOMC20051213meeting/FOMC20051213meeting--86.txt MR. KOHN Long-term interest rates globally were little changed on balance over the intermeeting period , and risk spreads out the yield curve and across risk categories continue to be low , reflecting the basically optimistic outlook of investors . FOMC/FOMC20051213meeting/FOMC20051213meeting--86.txt MR. KOHN Nonetheless , the incoming information also reinforces the notion that we can afford to retain the gradual path of policy tightening as we look for signs that moderation is coming . FOMC/FOMC20050202meeting/FOMC20050202meeting--164.txt MS. BIES My personal forecast a year ago would never have had long-term interest rates at the levels at which they 've been sitting . FOMC/FOMC20050809meeting/FOMC20050809meeting--163.txt MR. KOHN In that regard , at some point rising short-term rates -- and recently long-term rates -- should take their toll on housing price appreciation . FOMC/FOMC20050809meeting/FOMC20050809meeting--163.txt MR. KOHN I agree that the incoming data should reinforce and strengthen our intention not to allow inflation and inflation expectations to rise from here . FOMC/FOMC20050809meeting/FOMC20050809meeting--163.txt MR. KOHN Although core PCE data for 2004 and before were revised higher , incoming information about the most recent several months has suggested an appreciable short-term deceleration . FOMC/FOMC20050809meeting/FOMC20050809meeting--163.txt MR. KOHN In particular , following this strategy -- especially compared to one of larger increases or those that were n't well predicted by the market -- reduces the odds of significant overshooting . FOMC/FOMC20050630meeting/FOMC20050630meeting--12.txt MR. WILLIAMS With housing wealth standing at around $ 18 trillion today , such a drop in house prices would extinguish $ 3.6 trillion of household wealth . FOMC/FOMC20051101meeting/FOMC20051101meeting--227.txt MS. DANKER With underlying inflation expected to be contained , the Committee believes that policy accommodation can be removed at a pace that is likely to be measured . FOMC/FOMC20050809meeting/FOMC20050809meeting--218.txt MS. DANKER To further its long-run objectives , the Committee in the immediate future seeks conditions in reserve markets consistent with increasing the federal funds rate to an average of around 3 1/2 percent . '' FOMC/FOMC20050630meeting/FOMC20050630meeting--145.txt MS. MINEHAN Obviously , higher interest rates would tend to level house prices off or take June 29-30 , 2005 51 of 234 house that they 're in . FOMC/FOMC20050630meeting/FOMC20050630meeting--145.txt MS. MINEHAN Finally , and this is more of a question , we talked about a 20 percent decline in house prices and what that would do in terms of the basic macroeconomic effects of it . FOMC/FOMC20050630meeting/FOMC20050630meeting--368.txt MS. YELLEN That is equivalent to saying that the equilibrium real fed funds rate is unusually low -- 1.4 percent in the Greenbook path . FOMC/FOMC20050630meeting/FOMC20050630meeting--368.txt MS. YELLEN These include the oil shock , the deterioration in the trade balance , and the still low level of investment spending relative to GDP . FOMC/FOMC20050630meeting/FOMC20050630meeting--368.txt MS. YELLEN The Greenbook forecast depicts an almost textbook scenario of an economy continuing along the path toward a rather attractive steady state . FOMC/FOMC20050630meeting/FOMC20050630meeting--368.txt MS. YELLEN Going forward , there are obviously some sizable risks , and I count the unwinding of possible house and bond market bubbles as one or two that are high on my list . FOMC/FOMC20050630meeting/FOMC20050630meeting--368.txt MS. YELLEN I noted that in recent months several FOMC members have commented that we usually know we 've come to the end of the tightening phase when we have tightened one or two times too many . FOMC/FOMC20050630meeting/FOMC20050630meeting--356.txt MR. GUYNN -LSB- Laughter -RSB- My supervision and regulation staff thinks this is an accident waiting to happen in our area . FOMC/FOMC20051101meeting/FOMC20051101meeting--140.txt MR. KOHN I 've defined accommodative for my own purposes as too low -LSB- laughter -RSB- -- too low to accomplish my objectives .