Yes.

Yes.

Well, basically you can just stop there. [Laughter] It’s the tradeoff between the two. Obviously, if you were more concerned about inflation outcomes than real activity outcomes, you might tilt it a different way.

There’s one minor qualification to what David just said. We do keep track of rough estimates of what we think that the rise in energy prices over the past few years is possibly doing to trend productivity, and we’ve come up with estimates that maybe it’s 0 ...

We’ve made no explicit adjustment for that in the potential output assumptions we have going in. Looking back, it was hard to see that there was much, if any, effect, but that’s a risk knowing that there could be some productivity effect and it’s just hard to ...

One test is whether in previous periods of financial stress like this, we saw what might be more upward inflation pressure than we otherwise could explain or productivity performance that we had trouble explaining. After looking at the experience during the early 1990s in the headwinds period and trying to ...

No.

I’ll take that because we did have a bit of an internal debate on that issue awhile back. In particular, Spencer Dale, who was visiting us from the Bank of England, was basically making exactly the same point you’re making and raising that issue.

No, they don’t know that you are more likely to reverse course in that case. So when you think of a communication strategy, which is not in these simulations, it says, “Oh, we’re going to do this, but in the event that the recession doesn’t occur, we ...

In both cases. But the question is whether it is viewed in the context of what is happening to output and inflation, whether they say, “Yes, that fits with the historical pattern of stabilization,” or whether, because the recession didn’t emerge, this looks as though it was after the ...

That is operating here very much. It is the same mechanism, but it works differently in the two cases, because in the case where the recession actually shows up, whether you take the gradualist approach or you take the risk-management approach, they see the recession, and the easing in monetary ...

It might not happen. I mean, you could have a situation in which business sentiment would not take a hit, for example, simultaneously with the stock market tumbling, and you would not see some risk premiums on bonds going up. That would be very unusual.

I would say a couple of things. One, you can think of the cost of raising capital through equity as having some small influence on business investment. That is pretty small. The big effect would be primarily on consumption, as you mentioned. Wealth effects to a smaller extent would affect ...

Mostly, but not totally.

No, it is not separate; the equity premium is a large reason that we had the big drop in stock values.

If you think about the forecast as resource utilization and inflation, then it has an effect on resource utilization that is bigger now going forward in the product market. We also see a bigger effect in the labor market, and if that were the only thing, it would have put ...

The path of the gap would have been to a first approximation unchanged going forward. Some of the greater resource utilization now and going forward is a combination of the fact that we haven’t really changed our view on the labor market, aside from once we took on board ...

In terms of the rationale for increasing potential going back over history, some of that, as I think I mentioned, was just that actual productivity performance has been better than the last time we reviewed this in the summer, and we are taking that on board. That is part of ...

On job destruction versus a slower pace of new job creation, it’s hard to answer that one. Some of those patterns have changed over time; and in monitoring labor market developments, we’re trying to keep track of those two elements and that sort of thing. Whether that would ...

The only thing I would add to Brian’s statement is that I think uncertainty about inflation in the long run could be moving up noticeably without really bringing into play disinflation or something like that. In other words, you could be more worried about going down to 1½ or ...

Go ahead.

Do you want me to take that last question, or do you want to?

Give me one second. On balance, the news we have received since the December Greenbook has been disappointing. The top panel of your first exhibit sorts some of the main indicators into two categories—those that were surprisingly weak and those that came in to the upside of our expectations ...

Thank you, Governor Kohn. Brian Doyle, Vincent Reinhart, and I will be speaking this morning on the material labeled “Staff Presentation on Producing and Publishing Economic Forecasts.” As the top panel of your first exhibit notes, the Federal Reserve regularly provides the public with information on the outlook in the ...