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

Thank you very much, Mr. Chairman. I, too, would like to thank you very much for presenting your thoughts at the beginning of this discussion. It was extremely helpful to my thinking through what comments I wanted to make at this meeting. I have also found Governor Kohn, Vice Chairman Geithner, and everybody else who has talked very helpful in thinking through some of these issues.

I am very much in favor of the forecast process that we are working on. I don’t think we have it totally right yet, but I think we’re headed in the right direction. It’s a great balance because, as opposed to establishing right now an inflation objective that would sit out there for all time—maybe that’s the direction in which you want to head in the future—it characterizes over a longish term—and I am attracted more to three years than to three to five years—how we see the balance of things working out in the economy and what we think it is possible to do with our inflation objective over that period, given the other factors that we need to think about in the economy and that are important, both to us and to everybody within our economy. So using these forecasts and putting a third year out there that describes what the balance of things would be given an appropriate policy path is something with which I could be very comfortable.

I like the way that Vice Chairman Geithner talked about beginnings and ends. One thing that I’ve been struck by in this whole communication process is how hard it is to move backward once one starts to do something. It is nearly impossible to take it away. So as we think about beginnings and ends, we need to be very careful about taking a step at a time. Even though it might seem reasonable to take five steps, we should try one, see how it works, and then move on from there. Giving a forecast four times a year; going to three years, not three to five; and showing the balance of things and the range in which the Committee would see those things turning out would be, I would say in harmony with Vice Chairman Geithner, “a good step.”

I agree with four times a year—that’s a good frequency. I was kind of drawn to some of Vice Chairman Geithner’s thoughts about whether or not to integrate this with the minutes. I came into the meeting thinking that it would be better as a separate document appended to the minutes that, if the timing worked out well, could be put into the Monetary Policy Report or could stand on its own. I tend to think of the minutes as a discussion of what happens at the meeting, focused on what we used to think of as the foreseeable future, which never was three years. It was always two or three meetings ahead, shaping the stance of policy over the near term. So I was on the same wavelength as President Moskow. The minutes describe a set of circumstances around which one is shaping current policy. Of course, they are related to the longer run, but that is a story that can be told somewhat independently and might be told better independently than woven into the minutes. But I think there is a need to think more about that—Vice Chairman Geithner had some interesting thoughts.

I think anonymity is useful at this time—again, I am thinking that, once one takes a step forward, it’s hard to go back. I like the histograms myself. They are personally informative. However, I think if we accompany at least the first round of these forecasts with histograms, it will be somewhat like throwing red meat at a tiger. We have had those boring tables in the Monetary Policy Report for thirty years. [Laughter] You know, the variance in the range, the outliers—they have been there the whole time. The market could have made a lot out of that, but it never did, not too much anyway. I think that we might be better off with a more boring approach as a first step into this four times a year—say we did it, write what it was about, give the table, but don’t give all these red histograms that seem to beg everybody to worry about the outliers. I don’t think that is going to be helpful to us in terms of discussing things.

I know we are probably running short of time, and I can’t go through all these questions in the same amount of detail. Let’s see, on that basis, I think that we should go forward four times a year and forecast a three-year time horizon. I like the idea of total inflation. Every time we have talked about this I thought that, if we are going to set a target, it should be in terms of a longish term in total inflation. I would be more inclined to the CPI. I should mention that I heard your comment that, if we focus on PCE, sooner or later everybody else will. That’s what we thought about ten years ago when we started talking about PCE, and over time people haven’t. PCE is there, but the CPI still is very, very common in terms of how people talk about inflation and the economy, and things are still linked to the CPI. I do think that we need to give a little more thought to either the CPI or PCE, and looking at the total as well as the core is very valuable. I don’t think that we should update our forecasts on anything other than what we heard at the meeting. There haven’t been many updates in the past. I wouldn’t expect there to be that many in the future, so I would think either the same day of the meeting, the next day, or the following Friday, depending on when the day of the meeting is. Fine, give people time to update their forecasts based on what they heard at the meeting but not on new data that are out there.

Okay. Let me see if there’s anything else. In terms of the benefits and costs of further expediting the minutes, I agree that there would definitely be costs to doing so. There may, however, be a benefit in that we might be able to get to the objective that we initially had of trying to make the statement after the meeting more streamlined. To me, that would be a significant benefit of expediting the minutes. We could focus the statement on what we did and why we did it and not try to make that a vehicle for some longer-term reference, but rather leave that to the minutes and then four times a year to the forecast. So I think there is a benefit to expediting the minutes. From a process point of view, people have to be able to get encrypted information on their Blackberrys and not be forced to carry their laptops with them every single place they go. If we expedite the minutes, that will become even more of a burden, I think. In a memo, Vince talked about delegating approval. I would not do that. The principals have to be the ones to approve the minutes. If we decide to expedite them, we have to facilitate that process so that the principals can weigh in in a timely way on the minutes. Did I miss something that somebody wants to hear about?

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