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

The path of the gap would have been to a first approximation unchanged going forward. Some of the greater resource utilization now and going forward is a combination of the fact that we haven’t really changed our view on the labor market, aside from once we took on board the new unemployment rate data, but that we did change on the product market. Going forward, the way it evolves further on, we see the labor market gap opening up a little more and the output gap opening up a little more—that is driven primarily by our sense that the economy in an underlying sense is weaker—and we have made an adjustment for that with the monetary policy assumption. But it is not quite enough. We haven’t lowered the funds rate as much as we would have needed to do to totally wipe out that fact and keep resource utilization constant going forward on the product side. This is a difficult question. It was a difficult one for us, definitely, going through it because we had many moving parts.

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