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

Thank you, Mr. Chairman. I strongly support your proposal to cut the federal funds rate by 50 basis points today and the wording of the statement. I’m pleased that the FOMC will take this step as part of a coordinated program with other central banks. In my opinion, a larger action could easily be justified and is ultimately likely to prove necessary. We’re witnessing a complete breakdown in the functioning of credit markets, and it is affecting every class of borrowers. The financial developments are dangerous and are having a pronounced impact on the economic outlook. The outlook has deteriorated very sharply, and even so, I still see the risks to the downside. Moreover, recent data on consumer and capital spending and on housing confirm that a sharp contraction in domestic demand is under way. As far as I’m concerned, for the reasons you gave, inflation risks have diminished markedly. Indeed, in a contraction as severe as that which is now on the horizon, I anticipate that inflation will decline noticeably below my own estimate of price stability. I think the Board has taken a wide array of creative and massive actions to provide liquidity to the credit markets. I think these are very appropriate and necessary. I hope we will do more, but they are not completely a substitute for cutting the federal funds rate. I think that’s an important complement to the liquidity actions.

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