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

Thank you, Mr. Chairman. I strongly support the proposals that you have laid out. I appreciate your doing so. They have helped focus this discussion. Besides agreeing with the proposals, I also agree with the reasoning that you have set out as to why this is the right step and why it is an important step. It doesn’t go all the way to having a single agreed-upon inflation objective, but I do think it’s a major step in that direction. Given the political realities and sensitivities and the differences of opinion and comfort level with moving wholly in that direction, I think this is a very constructive step. It moves us forward, and it doesn’t preclude other measured steps later on. It would worry me to take this step if there were a huge difference among us about the quantitative definition of an appropriate price stability objective. But it is clear that the range of difference is not very broad; 1½ to 2 in the grand scheme of things seems to me to be very minor. Certainly, at this point going out to a third year, it seems to me, will be very informative to the public.

I really like the idea that, having talked about our individual comfort zones, we will be able to get out of the current phase of being very reluctant to talk about this topic at all. It would be good to express in our own speeches something that reflects a Committee objective. I think that 1½ to 2 as a range of what we think of as price stability is adequate and will be useful. It will let us clearly explain our objectives and our strategy for using monetary policy to achieve them, which is something we really haven’t done much of, and I think that’s a good thing to do.

I am really torn about your proposal about whether or not we should go beyond three years. We are lucky at this point that we are awfully close to the range that we think we would like to be in. But if at some future date we were a lot further from the objective, I could easily imagine—given my own view of the tradeoffs between the employment and inflation goals—that three years would be an insufficient period for you to look at my projection and see what my view of price stability was. So at some future date, having a range as short as that could be problematic. However, going from three to five years has a disadvantage in that we will, in effect, be laying out something that the Congress is likely to view as an employment goal or an unemployment goal, and I am worried about taking that step. So I am really torn about it.

Just a bit on a few specifics—I think that four times a year is appropriate. I like our sharing our projections among the Committee members; it has been helpful in understanding what other people think and in facilitating our own discussion. I think the staff has done a wonderful job of producing the narrative. A major thing that we can provide to the public is to lay out our reasoning about the economy. It is being nicely done, and I think we really have that in good shape. I like the idea of a total inflation number. I like the CPI because of its familiarity but could certainly live with the PCE as well. I like “appropriate policy.” There have been a lot of concerns in the Committee about projecting the fed funds rate. In the past I have been where President Plosser is now in terms of wanting to reveal that to the public, but many good reasons have been advanced in our discussions about why we shouldn’t do that, at least for now. With respect to the concern that, if we are very specific in our own submissions, it will eventually become public, my own feeling is that, in this round, just asking people “Do you agree with Greenbook?” or “Are there any significant differences?” has been quite informative and is sufficient.

I like the treatment of uncertainty in this round. Asking people to put down their own numbers was false precision—I really didn’t like that. Providing some table of model-based or forecast-based historical averages is very helpful if combined with some qualitative discussion. I am a little worried about the histograms. They are nice graphical devices. But are they really informative about something we want to inform the public about? I share some of the concerns that have been expressed about outliers and whether or not we want to focus attention on them. With respect to timing of the forecasts, I really think we should not be adding information in those projections that goes beyond what we had at the meeting. It will be very confusing if we try to do so. I feel that we should have the projections finalized either on the day of the FOMC meeting or shortly thereafter but not based on any additional information.

With respect to publication, I agree with President Moskow’s thoughts that putting the projections out as an appendix to the minutes is desirable, though we will have to be careful about what we say in the discussion. We can then also include them in the Monetary Policy Report. I do like the idea of expediting the minutes, especially if we figure out a way to be able to read them on our Blackberrys. We ought to be able to do that—most of the compression in time to cut it down to two and a half weeks comes in terms of our own response time. I think that we can respond quickly, especially if we can get them while we’re traveling. I like the idea of being able to use the minutes in our speeches. We have not yet talked about the statement, but I think getting the minutes out more quickly will also take a little pressure off the statement. If the staff can find a way to write the first part of the minutes and we can present it as the staff’s information that they brought into the meeting, that will also take a burden off the minutes, and I hope it will take some burden off the staff.

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