MS. PIANALTO
Even if the odds of the sentiment slump and the deteriorating inflation expectations scenarios are similar , the policy implications are not .
MS. PIANALTO
But they emphasize that the indirect effects of the storm , driven primarily by increases in costs of energy and building materials prices , will be difficult to discern for many months .
MS. PIANALTO
I 'm very pleased that we 've enjoyed the public 's confidence regarding our commitment to containing long-term inflation expectations for as long as we have during the successive energy price increases that we 've been hit with , but I 'm not anxious to test the limits of that confidence .
MS. PIANALTO
My directors report that they are already witnessing some retrenchment in consumer spending , and they do n't know how much of this is just a temporary reaction or how much of it is a preview of more adjustments to come .
MS. PIANALTO
But in the aftermath of the hurricane , and with the fragility in the energy markets , I found myself focusing September 20 , 2005 71 of 117 business contacts , they appear to have more anxiety about future prospects than about the present circumstances .
MS. PIANALTO
On the positive side , most reports that I have been getting still have the flavor of businesses unable to pass on higher costs to their customers .
MS. PIANALTO
The Greenbook projects a GDP difference in those two scenarios that is very small , but the difference in the projected inflation outcomes is too sizable for me to ignore .
MS. PIANALTO
Fortunately , as several of my contacts have explained , more than the usual number of price increases are taking the form of surcharges that are expected to be removed when energy and other raw materials prices recede .
MS. PIANALTO
To the extent that this practice lies behind some of the near-term bad news that we are seeing on the inflation front , there is still reason to think that the Greenbook baseline projection September 20 , 2005 72 of 117 scenario highlights a risk to the outlook that also troubles me a great deal .
MS. PIANALTO
The preliminary release of the University of Michigan 's consumer sentiment survey illustrates this concern , and I think the Greenbook 's `` sentiment slump '' alternative scenario addresses the policy issues that such a development would entail .
CHAIRMAN GREENSPAN
The first item on the agenda is the selection of Richard T. Freeman as an Associate Economist of the FOMC to serve until the election of a successor at the first regularly scheduled meeting of the Committee in 2006 .
MS. BIES
So I felt comforted that in the Senior Loan Officer Survey only a few banks said they had changed their underwriting standards because of the new guidance .
MS. BIES
We know that home equity lines have been used not only to extract equity for spending but also increasingly for downpayments on purchases of homes -- more so than in the past .
MS. BIES
As you know , the Senior Loan Officer Survey , covered in the supplement to the Greenbook , reported only modest changes in demand for credit ; it was modestly lower .
MS. BIES
And with some of the trends we 're seeing in core elements of inflation , getting a number over 2 percent , as the forecast has , begins to give me some concern .
MS. BIES
It does n't reflect what the banks are showing in the quality of their credit or in the securitized transactions that are out there in the market where delinquency rates have basically been fairly stable .
MS. BIES
As a couple of you have already noted , the data on consumer borrowing have shown a lot of noise , as I would call it , in the last couple months .
MS. BIES
The change in practices will slow credit growth for some clients -- the ones who chronically are over their lines and who have paid only the minimum monthly fee .
MS. BIES
On the other hand , if we look at the chart in the Greenbook on bankruptcy filings , there was a huge spike in the week prior to October 17 , just before the new bankruptcy law went into effect .
MS. BIES
What I 'd like to do today is to talk a little bit more about some recent trends in consumer borrowing information , which a few people have already mentioned , and then just make some general comments on the economy and on inflation .
MS. BIES
So again , this could reflect something more that November 1 , 2005 73 of 114 As you know , the banking agencies later this quarter are going to issue some guidance on mortgages and on loans for commercial real estate .
MS. BIES
Again , our intention is not to signal alarm that overall credit quality and underwriting are poor , but to call attention to some lending practices at the limit that are raising some concerns .
MR. GUYNN
Despite the increased uncertainties , however , I view the most likely path for output , as does the Greenbook , to be near or even above potential and , as such , unlikely to require attention from monetary policy .
MR. GUYNN
At the same time , he reported that the prices of building materials were now clearly reflecting the higher energy costs involved in their production .
MR. GUYNN
And just two days ago , one of our former directors from central Florida reported that one of the area 's largest contractors was told that concrete was about to go on allocation and to discontinue Saturday deliveries .
MR. GUYNN
Residential construction in Florida remains white hot , with continuing concern about speculation in those markets as I 've been reporting for a while now .
MR. GUYNN
Obviously , the earnings May 3 , 2005 35 of 116 Furthermore , the large gains in temporary employment may be indicative of reluctance to add full - time employees unless absolutely necessary .
MR. GUYNN
Having said that , I conclude that , with the increased uncertainty about the real economy , we need to think hard , very hard , about just how much we really know and what to say about the path of policy going forward .