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MONETARY POLICY ANDMORTGAGEMONEY A d d r e s s by President, DELOS C. JOHNS Federal Reserve Bank of St. Louis Before the MORTGAGE BANKERS ASSOCIATION OF ST. LOUIS Park Plaza Hotel, St. L o u i s . Missouri Thursday evening May 24, 1951 MONETARY POLICYANDMORTGAGEMONEY 1 want t o t a l k t o you tonight about monetary policy present t h i s s u b j e c t , I t seemed t o me t h a t i t could be done best by discussing f i r s t the general economic s i t u a t i o n and the place of monetary policy In a broad a n t i - i n f l a t i o n a r y campaign. This should out i n t o proper oerspective the monetary policy a c t i o n s taken in recent months. Following t h i s I w i l l attempt t o discuss some of the implications of recent monetary policy a c t i o n s for the mortgage money market« Let us look f i r s t a t the general economic s i t u a t i o n . All of you know t h a t we have been going through a f a i r l y serious Inflation. I believe t h a t we face a problem of more i n f l a t i o n a r y pressures in the f u t u r e . 1 do not intend t o r e c i t e a lot of figures t o prove the point t h a t we have been experiencing inflation; I am sure you a l l knew t h a t prices have r i s e n r a p i d l y . t h a t the d o l l a r buys l e s s now than i t did a t t h i s time l a s t y e a r . Nor am 1 going t o discuss the e v i l s of i n f l a t i o n ; t mm equally sure t h a t you a r e a l l conversant with the®. 1 w i l l have something t o say about prospects for the future. however. Actually we have had i n f l a t i o n for most of the time over the past ten y e a r s , ever since 1940 when the defense program preceding World War II got under way. The b a s i c underlying forces in the economy have b e e n on the I n f l a t i o n a r y side during t h a t whole oeriod. There have been temporary l u l l s . even a modest dip in a c t i v i t y . but fundamentally we have had the problem of i n f l a t i o n before us since 1940. -2Note t h i s f a c t ; it has implications for the f u t u r e . The American economy was moving in a strongly upward trend t o June, 1950 when the war in Korea began. prior Following the modest d i p in l a t a 1948 and the f i r s t half of 1949. economic expansion got under way and was proceeding at a f a i r l y rapid r a t a before t h e outbreak In Korea. By J u n e , 1950 most of the signs were pointing t o a resurgence of strong i n f l a t i o n a r y f o r c e s . With war in Korea came a great projected increase In our defense program. We a l l heard t h a t i n f l a t i o n a r y forces would be i n t e n s i f i e d because a g r e a t l y accelerated defense e f f o r t would be superimposed upon an economy which a t the seams. w a s already s t r a i n i n g Actually the i n t e n s i t y of economic a c t i v i t y throughout the l a s t half of 1950 - and most of the increase r i g h t up t o now - has been due mainly t o increased demand since the expanded defense program was s t i l l paper a t the close of 1950. civilian largely Even today defense expenditures a r e far from the peak level previously expected. although are much higher than a t t h i s time l a s t y e a r . quarter on they In the second of t h i s y e a r . outlays for defense and foreign aid combined are running at an annual r a t a of $36 b i l l i o n as compared with an annual rate of $17 b i l l i o n in the comparable period of 1950. To reach the goal set for tha program in 1951. these outlays w i l l have t o ba stepped up t o an annual r a t a of $50 b i l l i o n by the l a s t ctuartar of t h i s y e a r . A year from now thay may be running i t a r a t e of $60«$65 b i l l i o n . Tha point I an making. of course. is t h a t so far we have had mainly a c i v i l i a n boos. Tha m i l i t a r y and foreign aid programs have had some affect on the economy but t h e i r real Impact I s - 3 s t i l l t o costs. Let me say a word about the state of the econony a t t h i s moment. We seem to be in another of t h e in a c t i v i t y I mentioned e a r l i e r . N e v e r t h e l e s s , w e a r e on a veryhigh level in t a r n s of employment, income, production and p r i c e s . has been no real decline in a c t i v i t y . t o be somewhat sideways. This kind of There The movement merely seems and has been for most of 1951 t o d a t a . situation War 11 and the postwar era. was not uncommon The fact t h a t we a r e again moving sideways i s not t o be taken as i n d i c a t i n g t h a t forces have disappeared. during World inflationary On the c o n t r a r y . i t seems apparent t h a t while these i n f l a t i o n a r y forces era somewhat dormant a t compared with the l a s t h a l f of 1950, n e v e r t h e l e s s t h e i r remains strong and m y grow s t r o n g e r . we still face potential Informed opinion i s that and w i l l continue t o face i n f l a t i o n a r y problems. T h a r . have b e e n settled quickly. I and a r e r u m o r s t h a t t h eKoreanwarmayba c e r t a i n l y hope such rumors prove t o be true. but I do not have any more definitive information about t h a t prospect than you do. However, the end of war in Korea would not by i t s e l f bring about much moderation in the i n f l a t i o n a r y potential• Only if paace In Korea should lead t o our c u t t i n g back the projected defense program would i t r e d u c ebasic i n f l a t i o n a r y forces. My guess is t h a t we w i l l continue our defense build-up pretty continue sense. much our regardless efforts of developments in Korea} t h a t we will t o become and retain stronger in a m i l i t a r y Our problem is not confined t o Korea i t is global in - 4 its a s p e c t s . The point t o watch f o r . then. i s not developments In Korea as such, but t h e i r effect on our defense program. Assuming t h a t the defense program goes ahead as presently conceived. with sharply increasing demands, it appears highly probable t h a t any l u l l w i l l prove temporary. and t h a t the major domestic economic problem for the next year and longer will continue t o be how t o r e s t r a i n I n f l a t i o n . One Important point t o recognise in t h i s connection Is t h a t recent evidence of weakness In s a w consumer goods markets. accompanied by Inventory i n c r e a s e s . r e f l e c t s In part the Influence of r e s t r i c t i v e measures now In e f f e c t . Consider a few figures t o emphasise the n a t u r e and extent of the I n f l a t i o n a r y p o t e n t i a l . If we work hard in t h i s country. If we increase our m a t e r i a l s supply. our manufacturing and t r a n s p o r t a t i o n c a p a c i t y . our employment and hours worked and our general p r o d u c t i v i t y . we may be able t o r a i s e our t o t a l output by about 6 per cent between now and t h i s time next y e a r . It w i l l not be easy t o do t h i s in an economy already operating at such a high l e v e l . but t h i s gain is perhaps possible t o a t t a i n . Convert t h a t increase i n t o d o l l a r s and i t comes out about $19 b i l l i o n a t present p r i c e s ( t h e d o l l a r value of our present output of a l l goods and services i s running c u r r e n t l y a t an annual r a t e of $300 b i l l i o n p l u s ) . We have seen t h a t present defense and foreign aid outlays are nam running a t a $36 b i l l i o n annual r a t e . and by t h i s time next year the r a t e is expected t o be $25 t o $30 b i l l i o n higher. Just for the sake of s i m p l i c i t y . forget about b o t t l e n e c k s . m a t e r i a l s d i f f i c u l t i e s and so on. which might keep us from a t t a i n i n g a f u l l 119 b i l l i o n increase In t o t a l output. -5- The figures I have c i t e d show t h a t the take of the defense program w i l l increase f a s t e r than t o t a l output w i l l increase. The r e s u l t w i l l Inevitably be l e s s for the c i v i l i a n economy. I might note here t h a t the c i v i l i a n economy will not be badly hurt in such a s i t u a t i o n • o v e r - a l l supplies will be a t near record l e v e l s .. but t h e r e w i l l be l e s s for c i v i l i a n s . and for reasons I s h a l l next d i s c u s s . t h a t is, or will be. Inflationary. So far 1 have been t a l k i n g mainly about production and supply of goods and s e r v i c e s . Now l e t us look at the whole p i c t u r e - the e n t i r e equation of i n f l a t i o n . goods and services in t h i s country generates All production of income. Current income is the major source of current purchasing power. When an economy is in balance. Income flows out in such an amount and in such a way that the people receiving It can buy up the production of goods and s e r v i c e s a s it flows i n t o the market. When the a v a i l a b l e supply of goods and s e r v i c e s is in balance with the supply of purchasing power. a f a i r l y s t a b l e econonmy r e s u l t s . If the r a t e of flow of purchasing power i s increased r e l a t i v e t o the a v a i l a b l e supply of goods and s e r v i c e s . t h e economy g e t s out of balance. That i s just what has been happening. The amount of purchasing power has been increased, and the amount of goods available t o the c i v i l i a n economy has a l s o been increased. but in s i m i l a r amount. And we must not forget t h a t as the defense program proceeds t h e r e will doubtless be an actual reduction in the amount of goods a v a i l a b l e for t h e c i v i l i a n economy. - 6 I have already said t h a t we a r t producing goods and s e r v i c e s in t h i s country a t an annual r a t e of about $300 b i l l i o n } and I want now t o emphasise that the production of t h e s e goods and s e r v i c e s generates equivalent purchasing power in the form of income• If we take away, l e t us say, $50 b i l l i o n of the production and reserve i t for m i l i t a r y use, but do not take away an equivalent amount of income generated by i t s production. i t is p e r f e c t l y c l e a r t h a t we have created an imbalance between the supply of purchasing power and the supply of goods available for the c i v i l i a n economy. That is not the whole story, however. Purchasing power coming from current income can be increased from two other sources. I t can be increased by the use of past savings. and i t can be increased by the use of more c r e d i t . 3oth of these f a c t o r s have been operating and have been widening the d i s p a r i t y between a v a i l a b l e purchasing power and a v a i l a b l e goods and s e r v i c e s . The net r e s u l t . a s you see, has been a strong r i s e in p r i c e s . Now t h a t . a s simply a s I can put it, is the inflationary s i t u a t i o n in which we find o u r s e l v e s . Current income i s r i s i n g f a s t e r than t h e supply of goods and s e r v i c e s . and in a d d i t i o n i s being reinforced by l i q u i d a t i o n of savings and use of c r e d i t . What can we do about t h i s ! That i s the Question. In theory. c o r r e c t i o n can come on e i t h e r side of t h e money-goods equation. In other words. the amount of the a v a i l a b l e purchasing power can be decreased or the available supply of - 7- goods can be increased, or both, That is the t h e o r e t i c a l answer, or perhaps 1 had b a t t e r say, t h a t i s the long-run answer t o inflation. From a p r a c t i c a l point of view, most current a c t i o n d i r e c t e d a t c o r r e c t i n g the i n f l a t i o n a r y s i t u a t i o n must of n e c e s s i t y be on the money side of the equation, I have already pointed out the short ..run prospect t h a t the supply of goods a v a i l a b l e for c i v i l i a n s la l i k e l y t o shrink r a t h e r than expand So we must t r y t o work on the monetary side t o reduce the a v a i l a b l e amount of purchasing power; in other words, t o reduce the supply of money, or t o reduce i t s r a t e of turnover, or both. That i s the general economic s i t u a t i o n a t i t i s now, and t h a t is the background against which t o view monetary policy a c t i o n s taken in recent months. But before turning t o the s p e c i f i c a c t i o n s taken in the monetary f i e l d , a most important point must be made. Sound monetary policy In an i n f l a t i o n a r y period alms a t r e s t r i c t i n g t h e amount of c r e d i t flowing i n t o the economy. Remember t h a t c r e d i t adds t o the supply of purchasing power. A r e s t r i c t i v e monetary policy operates a s an a n t i - i n f l a t i o n a r y device by reducing c r e d i t (and hence purchasing power), and thus causing t h e spending plans of consumers and businesses t o be revised downward. It i s e f f e c t i v e a s an a n t i - i n f l a t i o n a r y device because i t reduces a v a i l a b l e purchasing power in so f a r as i t reduces a v a i l a b l e c r e d i t , I might point out t h a t a r e s t r i c t i v e monetary policy may merely keep c r e d i t from expanding - 8 - f u r t h e r . r a t h e r than a c t u a l l y reducing i t . or i t m a y m e r e l y hold down the r a t e of c r e d i t expansion. The problem, of course. i s t o make the policy just r e s t r i c t i v e enough and not so r e s t r i c t i v e as t o c r i p p l e e s s e n t i a l a c t i v i t y . I t i s , of course. e n t i r e l y c l e a r to you t h a t monetary policy is hut one phase of an a n t i - i n f l a t i o n a r y campaign. It cannot do the job alone; it cannot alone reduce purchasing power enough t o warrant being considered a panacea for inflation. To be e f f e c t i v e it must he accompanied by c o n s i s t e n t and coherent a n t i - i n f l a t i o n a r y p o l i c i e s in other f i e l d s . It must be accompanied by appropriate f i s c a l policy and by s t i m u l a t i o n of savings. It should be accompanied by well conceived Governmental policy with respect t o m a t e r i a l s . wages and p r i c e s . p r o f i t s . a g r i c u l t u r e . and so on. I t should be accompanied by e f f o r t s t o reduce l e s s e s s e n t i a l Government spending. both in and out of the defense program. n e v e r t h e l e s s . monetary policy has its e s s e n t i a l part t o play and can be a powerful force a s part of a general a n t i - i n f l a t i o n a r y campaign. The monetary a u t h o r i t i e s have made important moves t o c u r t a i l i n f l a t i o n a r y e f f e c t s since the Korean war began. As a matter of f a c t . the Federal Reserve System was pursuing a moderately r e s t r i c t i v e policy even before June. 1950. since there were. as I mentioned e a r l i e r . already strong i n f l a t i o n a r y forces in the economy. order) Since Korea the following a c t i o n s ( i n chronological have been taken: (1) The discount r a t e s of the federal Reserve Banks - 9 were raised somewhat, and short-term money r a t e s were allowed t orise.(Z)Consumer c r e d i t r e g u l a (3) A new r e g u l a t i o n dealing with real e s t a t e c r e d i t was made e f f e c t i v e . (4) Reserve requirements of member banks were raised t o s u b s t a n t i a l l y t h e i r upper legal l i m i t s . (5) The Federal Reserve System discontinued i t s policy of price support for Government s e c u r i t i e s . thus c r e a t i n g a f l e x i b l e market in such s e c u r i t i e s . The l a s t a c t i o n was the most important s t e p and t h e one exerting the most profound effect on the mortgage money market. We should discuss t h a t s t e p in some d e t a i l . The federal Reserve System has i t s major Influence on the r a t e of c r e d i t expansion through i t s a c t i o n s on bank r e s u m e s . In t h i s country i t i s important t o d i s t i n g u i s h between two types of lenders nonbank lenders a n d commercial banks. Nonbank l e n d e r s , of which most of you oeople are r e p r e s e n t a t i v e , cannot increase the supply of money by t h e i r lending a c t i o n s . They can increase to some degree the a c t i v i t y of the money supply but they cannot increase t h e t o t a l supply. Their lending operations r e s u l t merely in t r a n s f e r s of a s s e t s t o t h e i r borrowers and leave the t o t a l supply of money unchanged. The commercial banking system, however. can and does c r e a t e new money by i t s lending a c t i v i t i e s because bank loans c r e a t e d e p o s i t s and banks are required t o hold only a f r a c t i o n - 10 of their deposits in the form of reserves. The commercial banking system therefore creates checkbook money on the basis of its available reserves. The primary responsibility of the federal Reserve System Is to regulate the supply, availability and cost of money; and the System operates to accomplish this function by varying the supply, availability and coat of bank reserves. Without free reserves the banking system is unable to expand credit. The Federal Reserve System becomes most restrictive. or perhaps I should say, it is in position to become moat restrictive. when it is able to withhold reserves from the banking system - when it la able to restrict the supply and availability of bank reserves. Whan the Federal Reserve buys Government securities it adds to bank reserves. When it sells Government securities it contracts bank reserves. If the System wishes to withhold reserves from the banks it has to be in position to refuse to buy securities offered in the market and perhaps even to sell securities. It cannot do this so long as it is pursuing a policy of supporting Government security prices In order to maintain a predetermined pattern of rates. Support means that the System must purchase securities when they are offered at the support price and there are no other buyers. Throughout the postwar period, until March 5, 1951, the federal Reserve had stood ready to support prices of Government securities whenever necessary. And support meant support at - 11 fairly rigid levels. We were not always buying s e c u r i t i e s . of course} some of the time no support was needed. but we were always ready t o buy if we had t o . On March 5 t h e r e came a majjor change In the f i n a n c i a l p i c t u r e . After the much publicized accord was reached between t h e Treasury and the Federal R e s e r v e . the System discontinued i t s major support operations In the Government s e c u r i t y market. Since t h a t time the market h i t been much more free -. and much more f l e x i b l e . The r e s u l t . a s you a l l know, has been t h a t Government s e c u r i t y prices have f a l l e n . In some cases s u b s t a n t i a l l y below par. Since we have not bought such s e c u r i t i e s . except whan we wished t o . and then mainly on the basis of the c r e d i t s i t u a t i o n . reserves have not bean as freely a v a i l a b l e t o the banking system as b e f o r e . No longer can Government s e c u r i t i e s be regarded as i n t e r e s t bearing c a s h . 1 want t o make a most important point r i g h t h e r e . When the System cut down its support operations and Government s e c u r i t y p r i c e s f e l l . the y i e l d s on Government s e c u r i t i e s rose; in other words. the i n t e r e s t r a t e increased. The a c t i o n s taken by the System were not taken for the mere purpose of increasing the interest rate. They were taken t o reduce the a v a i l a b i l i t y of reserves and of c r e d i t . Such r e s t r i c t i v e a c t i o n usually r e s u l t s in higher i n t e r e s t r a t e s . but such an increase in r a t e s should be viewed as a by-product of r e s t r i c t i v e monetary policy r a t h e r than as an end r e s u l t . - 12- Let as explain here that we do not believe the demand for c r e d i t i t reduced in any great degree by r e l a t i v e l y small r i s e s in i n t e r e s t r a t e s . Some marginal borrowers may be knocked out of t h e market by s l i g h t l y higher r a t e s , but t h e r e is no great reduction in t h e amount of c r e d i t demanded. C e r t a i n l y , higher i n t e r e s t r a t e s do not d e t e r lenders from making more l o a n s . The real e f f e c t i v e n e s s of r e s t r i c t i v e monetary policy t i t s in c u r t a i l i n g the supply of funds a v a i l a b l e for lending. I want t o s t r e s s the following key p o i n t s . Federal Reserve freedom in the Government s e c u r i t y market means that we do not have t o buy s e c u r i t i e s a t any given price.. can be sold in the market a t some p r i c e . Or course, s e c u r i t i e s But if t h a t price is lower than the cost of a c q u i s i t i o n , the owner i s usually not very e n t h u s i a s t i c about s e l l i n g . If the owner i s a bank. quotations for Government s e c u r i t i e s below par mean t h a t the banker has t o pay a higher price for h i s reserves If he g e t s them through s a l e of Governments. If he cannot s e l l s e c u r i t i e s a t a p r i c e satisfactory t o him,. he i s simply deprived of t h a t means of acquiring a d d i t i o n a l reserves. Federal Reserve a c t i o n t o reduce a v a i l a b i l i t y of reserves a l s o a f f e c t s nonbank lenders. I f the s e c u r i t y owner i s a nonbank holder, e s s e n t i a l l y the same line of reasoning a p p l i e s . The major difference i s t h a t nonbankers cannot multiply c r e d i t expansion on the b a s i s of free r e s e r v e s ; they can lend only the proceeds of t h e i r s e c u r i t y s a l e s . f o r the past several weeks the Government s e c u r i t y market - 13 - has been on i t s own for mil p r a c t i c a l purposes. and t e l l i n g has been done primarily credit conditions. System buying in the l i g h t of prevailing We have bought r e l a t i v e l y email quantities of bonds a t times t o keep the market orderly, but t h e r e have been no l a r g e - s c a l e support operations. The r e s u l t h a . been t h a t the supply of funds a v a i l a b l e for lending has tightened up considerably. And a t a r e s u l t of t i g h t e r money we have seen increasing signs of more expensive money. The key f a c t o r . however. i s not cost but a v a i l a b i l i t y . you a r e fully aware of t h i s f a c t . I am s u r e . Most of I understand t h a t mortgage funds a r e hard t o come by n o w a d a y s . Most insurance companies, for example. do not seem t o find i t expedient t o s e l l Government. below per In order t o make mortgage l o a n s . This discussion of the general economic s i t u a t i o n and t h e steps taken t o make monetary policy more r e s t r i c t i v e may serve. I hope. t o bring i n t o focus the factors influencing t h e supply and demand for mortgage money. On the supply side these points should be notedi 1. As a r e s u l t . for one t h i n g , of attempting t o get as much money committed before Regulation X and I t s companion r e g u l a t i o n s by the Housing and Home finance Agency a n d the Veterans Administration became e f f e c t i v e . the principal nonbank suppliers of mortgage funds took on unusually heavy commitment l o a d s . Thus they began the year 1951 with much of t h e i r a n t i c i p a t e d 14 available funds for t h a t year already earmarked. Sources of a v a i l a b l e funds f a r such lenders were then considered as being (a) increases in cash a s s e t s coming from general cash a s s e t growth and repayments of previous loans and (b) Government s e c u r i t i e s which could be sold In a supported market. The l a t t e r source no longer can be counted on for two reasons! (1) As a r e s u l t of the d e c l i n e tn Government s e c u r i t y p r i c e s , holders are r e l u c t a n t t o r e a l i s e l o s s e s by s e c u r i t y s a l e s . and (2) as a r e s u l t of the r i s e In y i e l d s on such s e c u r i t i e s , they a r t more a t t r a c t i v e as Investments and thus more competitive with mortgage loans. Thus. because of previous commitments and because of the fact t h a t Government s e c u r i t i e s a r e no longer the equivalent of i n t e r e s t bearing cash. the supply of new mortgage funds has diminished. Z. Commercial banks find themselves In much t h e same p o s i t i o n as nonbank l e n d e r s . When banks must s e l l s e c u r i t i e s in order t o make more mortgage loans, the r e s u l t s of such action have not r e c e n t l y seemed so a t t r a c t i v e as they used to be. 3. Both bank and nonbank lenders a r e following p o l i c i e s of attempting t o r e s t r i c t c r e d i t in keeping with the p r i n c i p l e s of the - 15 Voluntary Credit ntary Credit Restraint Program The ultimate r e s u l t of these three f a c t o r s i s t h a t mortgage money i s not s o available a s i t was. On the demand side these points should be noted: 1. Higher p r i c e s for housing h a v e d o u b t l e s s knocked some prospective buyers out of t h e 2. Regulation X a n d market. accompanying regulatory a c t i o n s , increading down payments and shortening m a t u r i t i e s of housing c r e d i t have brought about some decline in demand for housing and h e n c e for mortgage f u n d s . 3. R e s t r i c t i o n sonuseof materials and d i r e c t r e s t r i c t i o n s on some t y p e s of c o n s t r u c t i o n (or permit r e q u i r e m e n t s ) a r e in e f f e c t . defense As the program grows, i t seems l i k e l y t h a t uses of c e r t a i n m a t e r i a l s w i l l b e f u r t h e r r e s t r i c t e d . These three f a c t o r s tend t o reduce demand for housing and demand for m o r t g a g e funds. There i s perhaps good reason t o feel t h a t the r e s t r i c t i v e f a c t o r s operating on the supply sida a r e more powerful t h a n those operating on the d e m a n d side. While higher p r i c e s , R e g u l a t i o n X, m a t e r i a l s shortages and so on are l i m i t i n g d e m a n d tosomedegree, demand for h o u s i n g i s s t i l l s t r o n g . There i s no appreciable offering of e i t h e r old o r new houses overhanging t h e market. 1© The demand for rental housing c e r t a i n l y has not been satisfied. On the other hand, the supply and a v a i l a b i l i t y of mortgage funds have been reduced considerably. We are told t h a t a number of Insurance companies e i t h e r are refusing t o take on a d d i t i o n a l commitments a t t h i s time or are s u b s t a n t i a l l y r e s t r i c t i n g t h e i r volume of new commitments. It Is generally true t h a t banks are not eager for more real e s t a t e l o a n s . At t h i s point I suspect you would l i k e me t o say whether I believe the conditions Just described will continue t o obtain and, if so, how long. As much as 1 would l i k e t o know what the future holds. I must confess a complete lack of clairvoyance. Moreover, I t Is not within my prerogatives t o preempt your r i g h t t o make your own a p p r a i s a l s of t h e forces a f f e c t i n g future developments. a n d base your own decisions t h e r e o n . If 1 can make any c o n t r i b u t i o n t o your d e l i b e r a t i o n s and your d e c i s i o n s . 1 believe i t will be by c a s t i n g some l i g h t on present conditions and t h e i r background. and t h a t 1 have t r i e d t o d o . In the s t r u g g l e between democratic and t o t a l i t a r i a n ways of l i f e , I t i s Important t o keep our own economy strong and h e a l t h y . By holding down I n f l a t i o n we can aid in building up our economic s t r e n g t h . t o accomplish t h a t end. Monetary policy is one important means In order t o be e f f e c t i v e the makers of monetary policy must be a l e r t t o constantly changing and s h i f t i n g conditions. This is p a r t i c u l a r l y t r u e when I n t e r n a t i o n a l factors beyond our control exert such powerful influences on the conditions with which monetary policy must d e a l .
@FedFRASER