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

Thanks. I also want to say that I am very supportive of what the Chairman and the Vice Chairman said. I really think this threads the needle for getting, as Vice Chairman Geithner said, the right balance. We get to provide more information with greater clarity and greater accountability, and I think it will also lead to greater credibility without being perceived as inflexible or challenging the dual mandate. Some of the questions and concerns that I raised in my interventions earlier indicated that I was supportive of an inflation goal, but I said it was a close call. For me, this is not a close call. It really addresses a lot of the potential concerns that I had. I also think it’s extremely good in putting us on the proper evolutionary path. As you well know, everything at the Fed moves at a pace that is likely to be measured [laughter], and so this should operate on that same pace. It allows us to understand how the new numbers will be perceived. As a number of people said, it is very hard to move back, but this gives us some experimentation and a clear movement forward. It allows us to think about appropriate risk management, as the Vice Chairman said, at least at this stage, particularly given that not everyone is on board with a particular number. Even if everyone were on board with a particular number, I think a more difficult thing would be that, if you are away from that number, what the right path is to get to it. I actually think that is the most difficult thing to get consensus on. This gives us a little more flexibility on that without making any particular commitments. It provides some credibility without raising something that could potentially be more problematic. Also, it allows us to harden this if we so choose. If we’re finding that we’re not getting the credibility benefits that we might hope from this, we can go forward.

On the specifics, I think there is consensus on many of the things that have been said, so I won’t go through the individual pieces. Just let me mention a couple of things. Actually, along the lines of what the Chairman said about focusing on PCE and the endogenous response that there will be more focus on it. I think that is, to some extent, correct. I also think that there may be some issues on existing contracts, and so it is an important point to think about.

The point that President Lacker raised is also an important one to think about: How are these different numbers going to be perceived? Obviously, we are focusing a lot on the particular number for inflation, but we are putting these other numbers out in the same format in the same way. This raises questions about growth goals, employment goals, the NAIRU, and Phillips curve tradeoffs, about which we certainly—or at least I certainly—wouldn’t feel comfortable in making commitments. That actually leads me to desire to put out just a third-year forecast rather than a three-to-five-year forecast, at least at this point because I think it reduces the chance of misperception and allows for greater flexibility of how we want to characterize it. It allows us to go forward and characterize it more as a goal, if we so choose and there isn’t confusion. But if we say three to five years, it is hard to step away from that being a particular goal. I am not saying that we don’t want to do that down the line. But at this stage I think I’d feel a bit more comfortable in sticking with the pace that is likely to be measured and just adding a year on that.

Again, on this endogenous response, if we do this quarterly, we are likely to generate a request for quarterly testimony from the Chairman, and that response becomes more and more likely the more independent we make this document. I’m not saying that anything is wrong with that, but I think we should just be aware of it. The Chairman should be aware of what he is getting himself into [laughter] and make sure that he feels comfortable with that, although I don’t see any problem with it. I just think that it is important to think about. With respect to the question about whether or not it should be anonymous, I think it is valuable to have the projections out there but to have them be anonymous. The main reason for anonymity is, as you well know, that a reporter will ask, “Don’t you think that President X is completely wrong?” Talk about red meat in front of a tiger. That is exactly what people like to look for. They like to look for dissent. Although there could be some benefits, I see attribution as mostly a downside— trying to generate dissent among people, which I think is not particularly productive.

I do broadly like the idea of expediting the minutes. Getting information to the market sooner and when it is fresher is more valuable. But I am sensitive to concerns about the downside risks of people being unable to weigh in and of excess burden on the staff. So we have to get that balance right. But all other things being equal, I prefer sooner rather than later. Making sure that we are available to give feedback or can get minutes securely in a more expedited process is a relatively small price for the nineteen of us to pay to provide fresher information to the public. With that, I would also say that we shouldn’t revise our projections beyond the day of the meeting because the minutes should be about the meeting. They shouldn’t step on or confuse things, and expediting them makes that kind of revision even more sensible. So I am very much on board with this type of proposal. Thanks.

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