Thank you, Mr. Chairman. On the threshold question about acting today, I don’t think we should act today. Intermeeting moves are relatively rare, they tend to be headline-grabbing, and in retrospect they turn out to mark—and are usually intended to signal— dramatic breaks from previous practice or reaction functions. From that point of view, I think in the current context a move at this call would inevitably be interpreted as a reaction to the increase in the unemployment rate, just given the timing of when the data have come out and when the move is. I don’t think that would be a good idea.
I share the sense that recession is a definite risk now and that the risk has gone up. I think that is persuasive. We have gotten real growth numbers that are weaker now. I think the outlook has to be weaker now than it was several weeks ago. But I am worried about inflation, too, and I wonder what a more proactive approach means for our strategy for inflation. The staff forecast that David presented marked down the real GDP forecast for ’08 by 0.3 and marked up the overall inflation forecast by 0.4. The usual Taylor rule puts a bigger weight on the inflation part than on the GDP part, and it doesn’t suggest a knee-jerk aggressive move down. I’m not saying that’s not what is required now, but it suggests some questions. Would a more proactive approach bring our expectations about our reaction closer to the market’s view? Is that how you interpret what you are advocating here? Or is this to move us beyond what the market expects?
Related to this, are you asking for some shift in our strategy on inflation? I mean, are you asking that we be willing to tolerate an increase in inflation or an increase in inflation expectations? In the current circumstances, and what looks likely for the next several months, it is hard to picture reversing course really rapidly. If things play out the way the staff forecasts, it is just hard to imagine us turning around and raising rates 50 or 100 basis points if inflation rises 1 or 2 percentage points. It is heartening that inflation expectations numbers haven’t risen more than they have, and I take comfort from that. But they are around 2½ percent on the CPI. It is not clear that what they reflect isn’t that occasionally we get it down to 2 but most of the time it bounces around above that. Without our having a clear sense of what our strategy is about where we want to bring inflation, I just question what you are advocating means for inflation strategy.