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

Thank you, Mr. Chairman. I came to the meeting preferring alternative B—50 basis points. I certainly can bring myself to support your proposal—75 basis points. I don’t view it as a fist pounder, but let me make the case for 50 basis points, at least as I think about it. First, I do think it is a movement that acknowledges financial instability and the growing real weakness. As I argued in my earlier remarks, it may set the scene for decoupling rate policy from liquidity actions if conditions allow. I think the action makes a minimal acknowledgement of inflation risk, and it may signal the view that lower rates can do only so much and that, best case, the market will have to proceed to sort out the market problems and, worst case, the fiscal authorities will have to deal with them. Although I am not a trained psychologist, let me just propose that, in dealing with market psychology, there may be some value in appearing to firm up our rate-movement policy and to set one element in the fluid situation with greater fixity than it has been in recent weeks. That might generate the kind of firming dynamic and even help produce a turn in psychology. That’s a lot to ask for simply 50 basis points, but I also prefer the language of alternative A to that of alternative B, and I think Brian said that you could conceivably apply alternative A language substantially to a 50 basis point cut. So in general I like that approach. Thank you, Mr. Chairman

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