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

Thank you, Mr. Chairman. I, too, am in favor of keeping policy where it is. As I stated yesterday, I see the risks around growth as better balanced than they were, even given the potential for the housing problems to be deeper and longer-lasting than we might have expected earlier in the year. I remain concerned about the risks that inflation will not continue to moderate, but I am not wed, as I have said many times, to a particular low number. I would be as happy at 2 as at 1½ and perhaps even happier given that levels that start with 1 seem to have downside risks—or at least they did the last time we were there.

I am concerned, however, about the pressures on the economy, whether you think of them in terms of headline inflation or in terms of the components of headline, particularly energy costs, tight labor markets, and a growing world. I think, although we may not want to put it in the statement, that Richard is right—our economy is subject to pressures from the rest of the world at this point and, related to that, the falling dollar. A lot of things could take inflation from its current moderate level and push it back up, and that I would be very concerned about. It is true that financial conditions have tightened slightly, so markets are starting to do a little work for us. But I believe that we need to continue with policy in a slightly restrictive stance to provide some insurance that the inflation pressures in the economy stay moderate. Staying with current policy is a good balance between the prospects we see for moderate growth and the prospects we also have recognized around the table for the potential for inflation pressures to get worse.

I support alternative B’s language. I want to say two things. First, the more substantive concern—I think that Governor Kohn’s thoughts about inflation pressures are slightly better than the current language. I was attracted to the “transitory” language that I think President Moskow raised first, and we fiddled around with it a bit in Boston, but I have been convinced that “convincingly demonstrated” and “transitory” are equivalent. [Laughter] So I don’t want to battle about that at this table. The statement in section 3 is headed in the right direction, and I would be in favor of its current form or the form that Governor Kohn suggested. Second, I may be the only one sensitive to this, but in section 2 we have two sentences that start with exactly the same words. I never wrote that way when I was in school. [Laughter] There is an easy way to make that sentence a little better from an English composition point of view. But, again, that is tricky to argue about at the table, so I guess I am fine.

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