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

Yes. I just want to make one comment about the issue of the fed funds path. Both Vice Chairman Geithner and Governor Warsh made a comment about the markets. When I hear you talk about the markets, I am struck that it is a very narrow definition of what the markets care about. You are looking at it in the context of what the financial markets care about is only what the funds rate is—what our path is going to be. I think that is much too narrow a way to think about what we are trying to do here. To say that they don’t care about inflation and that they care only about the funds rate is a slippery slope. Whether it is just a financial adviser who is worried about inflation planning for his clients or people who are investing long term and trying to make decisions about housing or other things, I think it does go back to inflation. It is not just about what the markets think the fed funds rate is going to be. In that regard—I am going to go out on a limb a bit here—to the extent that longer-term decisions or the prices of longer-term assets, such as longer-term bonds, move frequently with short-run funds rate decisions—sometimes more, sometimes less—that really tells us something about what they are expecting the path to be in the future. They are trying to infer something about our future path from one decision. To the extent that we can provide some more certainty or shape to that path as it relates to our inflation objectives or our inflation ranges that we want to talk about, we are going to change that dynamic between short and long rates in a way that will remove some of that uncertainty and some of that speculation about what the path is going to be, even though we can at the same time convey some uncertainty about our individual perspectives about that. So I think we want to be careful not to become too focused on what tomorrow’s market response will be and what they care about because I think it goes beyond just that. I just wanted to share that with the group. Thank you.

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