And I will provide it. [Laughter]. Whether it’s worth anything or not, I don’t know. [Laughter]

I’m not sure I have an empirically based response. We can actually estimate from the model a confidence interval around a parameter estimate of the NAIRU, which as I indicated, is wide; but I don’t have a similar thing for inflation expectations. However, I would argue that, if ...

Well, I can speak to the Greenbook-consistent measure, and perhaps Vincent will want to talk a bit about the simulations of the Bluebook. One thing that you have to keep in mind is that the Greenbook-consistent measure of R* is the level of a real interest rate that would be ...

To go back to what I said to the Vice Chairman, implicit in that long- run scenario is a 2 percent inflation expectation that is sort of pegging inflation. Obviously we could be seriously wrong about that. We could also be seriously wrong about the degree of resource utilization in ...

Many of the factors that you’re citing as temporary on the downside regarding inflation we see as having been temporary on the upside regarding inflation as well. The higher energy prices and the pickup in import commodity prices were some factors explaining how we got above 2 percent, and ...

At the time of the last FOMC meeting, we were feeling as though the incoming spending data were coming in pretty darn close to our expectations and were pretty consistent with our story about entering a period of below-trend growth. As we noted, and President Moskow quizzed us about, the ...

Well, your recollection is correct, I think. That was probably just a hazy answer, not a hazy memory on your part. In some sense our basic view is that getting to 2 percent is the gravitational constant that we currently see. We haven’t really seen any evidence to suggest ...

Correct.

For a given level of resource utilization, you’re getting more cost pressures, and you’re getting more upward pressure on prices. So it’s not a matter of their absorbing all of it in their profit margins when they’ve got that increase in costs. You’re absolutely right ...

Obviously, if you could levitate inflation expectations, that would be one thing. The other thing is that note 21 in the package we sent you included some exercises that suggested, if you took actions that could significantly reduce the long-term Treasury rate and compress mortgage spreads, there would be ways ...

The point of constructing this optimal control is to say that, gee, if you weren’t constrained, here is how we thought optimal behavior—the sort of optimal outcome— would be, given the shocks. You’re asking me whether or not there are quantitative policies that you could put in ...

My guess is that, if our baseline forecast evolves in the way we are expecting here, you are still going to be worried about the downside risk to inflation even if, in fact, we were in the process of bottoming out because there will still be a very substantial output ...

We apologize for our lack of manners. [Laughter]

We are looking for about minus 0.5 percent in December and minus 0.1 in January. We are also not expecting the core figures to remain as low as they have been running for the past month or two. We do think that they have been held down by ...

December/January—exactly.

No. We have another two months of small declines anticipated as the energy prices continue to pass through and then, beyond that, some small increases. So we don’t see this as an extended period of negative headline.

It wasn’t looking too good last week. [Laughter] But we’re expecting that it would provide a small rebound effect on first-quarter GDP growth. It’s going to take a little while to get production back on track here.

We actually predicted that the strike would end this week. It did.

Yes. You have at your place a table on orders and shipments of durable goods, one of the more inscrutable releases to actually make sense of, but the bottom line is very little effect on our basic outlook here. As you can see in that second set of numbers, the ...

I think that just offset the decline that had happened since the time we finished the Greenbook. [Laughter]

The answer to that is “yes”—it is certainly possible. Obviously, it is very difficult to separate things that might actually have changed the transmission channel of monetary policy from just big financial developments that have offset the beneficial effects of easing policy. We built an assumption into the baseline ...

We made a deliberate decision in constructing the forecast, given the enormous uncertainty about both the size and the composition of those fiscal packages. We had so many moving parts in our baseline forecast that we wanted to present you with that and then show you what the consequences might ...

What we wanted to convey in the alternative scenarios that we showed this time—and we reduced the number because we thought the possible little risks that you might be facing were being swamped by some really big ones—was our sense that the likelihood function is pretty flat around ...

I can give you some probabilities, but I don’t know how seriously you should take them. [Laughter]

That’s how we were thinking of it. The 50 basis points, however, was not done on the basis of any deep analytical analysis of whether that, in fact, is the zero bound, and I think that’s an issue that the staff will need to address pronto. But the ...

Thank you, Mr. Chairman. In response to your request for some economy in our remarks this morning, I’m going to set aside my prepared remarks and just hit some of the highlights here. We did receive a great deal of macroeconomic data since we closed the Greenbook last Wednesday ...

That’s correct—and the timing. So there are two aspects. One is that we have interpreted some of the surprise as a persistent strengthening in aggregate demand that we had not anticipated. The other is that the economy is not as weak now, and therefore the bounceback in activity ...

Again, we want to step back a bit from taking this regime-switching too seriously as implying that there are just two states of the world or maybe three states of the world. There are lots of different states of the world. What we are trying to do is look at ...

From a forecasting perspective, President Evans, I think you’re right. I don’t think models that rely simply on labor costs to predict prices are very sound in terms of their forecasting ability versus just a plain old price–price type of Phillips curve or a price type of ...

We left at your place, and I hope you have found, a GDP advance release for the first quarter. It came in at plus 0.6 percent versus our Greenbook forecast of 0.4. It was really very close to our expectations, both for the total and for the individual ...

Yes, 1980–82 is in there. Again, the composition of where these residuals are is obviously heavily tilted in this case to housing, some of which is already behind us. So it isn’t quite as though all of this weakness is prospective. Some of this weakness we have already ...

Basically, we did an average of the residuals in recessions since 1970.

Yes, though that may be putting it too scientifically. In essence, we were looking at a configuration of data that, at the time of the March meeting, appeared to indicate recession. Even though we did not have the spending data in hand—and, as Governor Kohn indicated, we still haven ...

Yes. First, you are absolutely right. The equilibrium funds rate calculation has no reference to inflation. It shouldn’t be viewed as a policy recommendation or where the fed funds rate should be. In essence, it is one transformation of the IS curve interacting with the supply side of the ...

Roughly, we’re offsetting about half the spending through the inventory drawdown, so you could basically take that. If you took away a significant fraction of the spending, we’d take away a significant fraction of the inventory liquidation, and the GDP effects would be moderated considerably.

That was based on our reading of the literature, especially of the last episode of fiscal stimulus, which was associated with the rebate package in the earlier part of the decade. We’re assuming a marginal propensity to consume out of those rebates of about ½—that seems reasonably in ...

I think I can assure you that our models of inventory investment are not very good.

A lot bigger than just the rise in expectations, and the fed funds rate, of course, would have to rise considerably.

On the inventory side of the forecast—again, you put your finger on the principal reason that inventories are as weak as they are in the near term, which ...

Your intuition on that last point is correct. Obviously, in that simulation we have inflation expectations deteriorate a little more from where we think they have deteriorated already over the past year or so. Again, this is really hard to pin down, but we think there has probably been an ...

I think that is a fair characterization. You know, one thing that we’re struggling with—and I assume you are as well in giving your own views about the uncertainty and the skewness around your forecast—is whether things have changed. Is the skew large enough for us to ...

I think I’m raising the white flag here. [Laughter]

What was going on there was probably—I don’t know if it was rational or irrational—inattention. But in looking at that over the weekend, it seemed like something that should not be considered as an analytical feature of the forecast. Just in terms of the falloff in consumption ...

This year certainly is pretty close to a jobless year in terms of a full year of nothing but employment declines and then fairly modest employment gains next year. But the principal reason we didn’t predict a pattern like the one we saw in the earlier part of this ...

Before explaining how the global developments that Nathan just described intersect with our domestic inflation forecast, I should briefly review some of the incoming information on prices. For the most part, the recent consumer price data have been running below our expectations. At the time of the March Greenbook, we ...

Nathan and I thought that we would alter slightly the structure of our briefing today so as to focus a bit more closely than usual on the global and domestic outlooks for inflation. I’ll start with a brief review of recent economic developments and our outlook for economic activity ...

I guess I was thinking more along the marginal change that we would make should the factors be more successful than we’re currently anticipating them to be. That would probably cause us to edge up our path of the fed funds rate to account for that.

I can’t really answer that question. Over this intermeeting period, we were coping with two important developments. One was that we saw some increase in overall measures of financial stress. As you know, we went to a forecast back in September when they first emerged and started marking down ...

The answer to that would be “yes.” When we layered on significant additional negative add-factors for this recession scenario, they really weren’t directly tied to our reading of liquidity in financial markets but a reading of the real economy.

We have thought about that, and the difficulty at this point is trying to identify the truly exogenous features of the current financial stress that is operating over and beyond the channels that are normally incorporated in our models. Our models, obviously, have asset prices, such as house prices and ...

President Fisher, I will just basically reiterate what I said earlier and amplify many of the same things that Nathan just said in terms of the influences on our headline forecast. We revised up ¾ percentage point as well, and that really is coming from higher energy prices, higher food ...