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

I would just like to add a comment in favor of uncertainty for the markets. Uncertainty is important in how markets work. Uncertainty is critical to market participants forming their own views about the future and managing the risks as they see them in the future. Everybody talks about the famous Greenspan put. We know Greenspan is going to be there to save us if the market overdoes it, so let’s just play into the rising market because the Fed will save us if everything tanks. That is an overdone argument, but I have heard it made. If we give people a policy path, no matter how we characterize it, they are going to take that as far more a given than we could ever really commit to, and they are going to make bets on that basis. When those bets don’t work out, it is going to be another version of the Fed leading them down the garden path. I really think we should not go there. We should encourage some uncertainty in markets about what our actual policy path is going to be, given that over a three-year period or a three-to-five-year period the range of the Committee’s preferences around inflation is within some narrow band. Let the markets figure out what they think incoming data prescribe in terms of policy and make their bets on that basis. I think a certain degree of uncertainty is absolutely healthy for markets.

Keyboard shortcuts

j previous speech k next speech