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

Then continuing with this, I would comment on the next paragraph. I’m very sympathetic to the idea that President Lacker was putting forward—that we somehow need to talk about our expectations about the size of the balance sheet. I was going to offer one suggestion: Perhaps for the “entail the use of” phrase in the first sentence of paragraph 4 we could substitute “sustain the size of the Federal Reserve’s balance sheet at very high levels”—something that would indicate that we expect the balance sheet to remain really large but doesn’t talk about whether we’re increasing it from today. Just a thought. I would leave in the sentence on the longer-term Treasuries in large part because we have already talked about it publicly and the language here gives us the opportunity to evaluate and does not necessarily commit us to those purchases in the future. In any case, we would need to explain whether or not we’re going to purchase longer-term Treasuries, having raised it already.

On the directive, I would say that I am comfortable with the directives as written. There might be room, if we found the right language for the size of the balance sheet, for inserting that sentence in here, for example, whatever we take from the first sentence of paragraph 4. I also think that, as part of this monitoring that the System Open Market Account Manager and the Secretary will provide for the Committee, there really is the opportunity to develop much better disclosure of what the Committee is doing, what our balance sheet looks like, and what actions we’re taking— some kind of ongoing monitoring that could be shared with the public that I think would also be very helpful in explaining what the Federal Reserve is actually pursuing in the near term and what it is doing with the balance sheet.

I was really impressed by something that President Lacker said yesterday, which is that— and I paraphrase—we are in uncharted waters but we are groping our way forward. I think that it is a great metaphor for where, in fact, we are. Some of these questions—such as what specific forward-leaning language we’d like to put in our statement over time and how we think about the monetary base versus the credit policy type of actions that we’re taking—are all things that I think we will continue to learn about and explore. What I had put forward is that, as we come to understand them better, we have an opportunity to communicate with the public and help them understand better what we are, in fact, doing. Thank you very much.

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