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

Like the Greenbook forecast, our forecast predicts a significant recession. Further easing will likely help mitigate the severity of the recession. Coupled with improvements in short-term credit spreads, a reduction in the federal funds rate should lower rates on home equity lines of credit as well as business and consumer rates tied to LIBOR, easing cash flow for consumers and businesses. We are facing problems of historic proportions, both here and abroad. A 50 basis point easing, as in alternative A, is both necessary and appropriate. Even with the easing assumed in the Greenbook, the unemployment rate remains too high for too long. The inflation rate falls enough to be well below my target. To avoid a severe and prolonged recession, we will very likely need further monetary easing and a significant fiscal package, even after this 50 basis point reduction in the federal funds rate.

I would just note in terms of the language that, although I am comfortable with the alternative A language, my actual views would be closer to saying “the predominant concern of the Committee is the downside risk to growth” rather than “nevertheless, downside risks to growth remain.”

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