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

Thank you, Mr. Chairman. I also prefer the fed funds rate recommendation and language of alternative B. It captures the delicacy—I think that word was used yesterday—of the current tradeoffs and leans fairly heavily rhetorically against inflation and inflation expectations. I note that inflation and inflation expectations are mentioned in both paragraphs 3 and 4 using the language, “Uncertainty . . . remains high” and “risks . . . have increased.” I think this constitutes considerable stress on the seriousness of our commitment to address inflation and expectations, and it is a complete statement and will serve to condition the market. As Brian said, it suggests that firming later in the year could occur, and I believe that is appropriate. I would like to give the medicine that we have applied to resolve the situation and the financial markets a little more time to work. I am in accord with Governor Kohn’s thinking of stimulus or accommodation in terms of the cost of borrowing to real borrowers—individuals and businesses—and, therefore, we really have not seen a proportionate improvement in the cost of capital, notwithstanding such a strong reduction in the fed funds rate.

So as of now, I would expect to support a reversal a little later in the year. I also think there is enough ambiguity currently that giving the situation a little more time to clarify would be helpful. Core inflation has not risen dramatically, whereas headline has, and it is headline that the public is reacting to. Measures of expectations, such as they are, seem to suggest that short- term expectations have risen more than long-term, so there really hasn’t been a clear breakout of long term. It may be true that it would be too late if we saw that breakout, but I think we can afford to wait for a greater preponderance of evidence to accumulate over the next few weeks before considering a reversal. So I support, as I said, alternative B and the language of alternative B.

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