Thank you very much. Obviously you have a bleak outlook. It’s very important to act quickly and decisively, and I think it’s clear from the discussion that our choice is between A and B. But as a number of people have mentioned, the economic substance is probably nearly identical in alternatives A and B. Our exposition of it, though, can make a very big difference.
There are an enormous number of moving parts, and there is a lot to digest. We potentially have here, as I count them, seven new things that people have brought up. That’s just an enormous amount to deal with, and I think some of them we want to delay. The inflation target is very important, but it brings up issues here, and I’m not sure that we want to talk about something like that now. So let me just quickly run through these.
We have to think about the dynamic of what we are going to say next time. What is this committing us to talk about? First, the rate cut is one very big issue—75 versus 50 basis points. Although some market participants think it will be 75, I think that will still be news, but I think it’s very important for us to move there. Second, just moving to a range is something new; I think that is something that is actually quite newsworthy in and of itself. Going to no target at all is extremely newsworthy, maybe too newsworthy to include with all these other things. I think of this and the discussions that we’ve had as setting up an extremely valuable template for how we should be thinking about the statement and what we need to be explaining today as well as over the next few meetings. So I would actually say that, given all of the moving parts and all of the changes, talking about a range either “between” or “of” zero to ¼ percent would make a lot of sense. I don’t think we’re introducing any more ambiguity. I think we’re introducing a bit of ambiguity especially for people who are not that well informed by saying that we don’t have a target anymore. What President Yellen said was that it could easily be misinterpreted as “gosh, we don’t really have control over these things anymore anyway.” I don’t think any of us believes that, and I think there’s more of a chance of that misinterpretation, which I don’t want us to have, if we do that today with all the other changes than if we waited a little. I still think the range is a pretty big shift.
Expressing concerns about inflation being less than the level fostering economic growth— again, I think that’s something that I would prefer to wait on. I like President Stern’s edit about talking about the appreciable diminution of inflationary pressures, but I would wait on putting in the phrase about whether the level is too low to be consistent with fostering economic growth. I mentioned the inflation target. I think we should wait on that. We’re introducing conditionality, which I think is valuable to do, and I think the phrase there is fine. We’re talking about old and new programs as well as balance sheet issues. As a number of people have mentioned, we have already talked about standing ready to expand the purchases of agency securities as conditions warrant. So that’s forward leaning already. If we are committed to doing the Treasury securities fairly soon, I think we should just go along with that and feel comfortable with that. But we do have to think a bit about the precedent of making concrete new policies that we’ve generally talked about in this statement. Is it something that we want to do going forward? Does this commit us to doing that? I don’t think so, but I think we should just think about that.
Then I think it’s very important that we talk about the use of the balance sheet. I agree with Governor Warsh that to be bold you don’t say “continue to.” But we are talking about some existing programs, so in some sense we are continuing. I’m not quite sure exactly where we want to go on this, but I just wanted to raise that ambiguity. On the balance sheet, though, I go back to the Chairman’s remarks from yesterday. It is important to think about the composition of the balance sheet, not just the size in and of itself—Governor Kohn also made reference to this—so I would be very wary of focusing on the size here. I think that just talking about ways to use the balance sheet is the appropriate way to go now. If we have more experience and understand better how the size might evolve over time, how the different programs we have might fluctuate, I’d feel more comfortable with that. If we talk about the size or commitment to growth of that size or expecting it to be large, just as a number of people said, it could suddenly shrink, and we don’t want people to think that we’re changing monetary policy because of that. Some of these things would just be changing over time. Thank you.