Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

Thank you, Mr. Chairman. Well, as several people have observed—and I agree—I don’t think there’s any significant policy difference between A and B. That’s certainly where I am. From a communication point of view, I have a mild preference for B. I think it’s a little clearer on the margin and would be helpful in that regard. So I would work off B as to some of the issues and suggestions that have been raised.

With regard to the first issue, I would not include the information in brackets in paragraph 3 at this point. I think Governor Kohn made a good point that we’re likely to be much better positioned to do that in January in conjunction with the SEP and the longer-term projections. Let me be clear. I am in favor of inflation targeting, but I think exactly how and when we get to that is important. So I wouldn’t want to do that simply in a casual way and do it too rapidly.

As I look at paragraph 3, I have a couple of other questions. The first sentence says that “inflationary pressures have diminished quickly,” which is certainly true, but I think it may be more important that they have diminished appreciably. So I would just make that point. I might also say, rather than “the Committee expects inflation to moderate in coming quarters,” which I think is probably true, that you might just say “the Committee expects modest inflation in coming quarters.” The reason I’m putting it that way is that I’m trying to get out of this point precisely about whether it is or isn’t going to run below what we think might be consistent with the dual objectives.

I think the conditionality in paragraph 4 is fine. If there’s a good way to strengthen it, doing so would also be fine with me. But trying to modify these things on the fly is always difficult. Finally, I would include the thought about purchasing longer-term Treasuries. I think we should, and because I think we should, I think we should say that. So I guess that covers the topics I want to cover.

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