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

Thank you, Mr. Chairman. I recognize that the risks on the economy are elevated. I have recognized it for some time. My concern is that the risks are elevated as dangerously, if you will, for inflation as for the slowdown. We have at this point a situation in which we have revised up our inflation numbers and yet that is after we have cut 100 basis points, which we have not seen the full effect of. Those rate cuts are in process now, and they are not going to address the housing issue, given its circumstances, and they are going to work slowly through the rest of the economy as we move forward. We have revised up in our estimates the fourth-quarter real GDP numbers, and I think that is important to note even though I know our risks overall are elevated for growth, given some of the data coming in. Job growth came in disappointingly. It did so also in September, and it was revised up significantly after that. I don’t know if the numbers will be revised up, but I would like to go cautiously, recognizing that they have been revised up in the past. I think there are tail risks. There is an important risk of the economy slowing, perhaps going into recession. I think that there is an elevated risk of the inflation numbers continuing to creep up as they have over the past several months. If these inflation numbers continue to rise as we decrease interest rates, there is a very serious cost that will have a very significant detrimental effect on the economy in the long run, which we need to keep sight of.

My concern—as others have expressed, but it is a very serious concern on my part—is that we say we can reverse the policy position or raise interest rates later. But it is extremely difficult, and understandably so, because the earlier actions will still be having an effect while the economy shows a slowing. When it starts to pick up, we won’t be sure, just as now, whether we really are going to accelerate and whether the economy is going to pick up. So we delay in reversing those actions, understandably so. So that is why I want to be very cautious about coming down with our interest rates because we will be very cautious going up with our interest rates on the other side of that.

I am very pleased that you have not put an actual proposal on an action today. I would be very uncomfortable with that. I think we need to have a full discussion with more information before we commit to any kind of interest rate moves at our month-end meeting. I understand the risk, but I think it requires a lot of analysis as we look both at inflation and what that may mean to us if it’s rising and at the real danger of a recession. Thank you.

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