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

In terms of this issue of forward-looking language, I’m quite comfortable with the statement and with forward-looking language so long as it’s on the right-hand side of the Taylor rule in terms of what’s going on with output and inflation. I’m actually not a fan of forward-looking language in terms of the federal funds rate, and in fact, I differ from some people on this. I really didn’t like it, even during the unusual period when there was some concern about deflation—in that context, it did have elements that people might have interpreted as a commitment. It turned out that nothing bad happened because the economy evolved in a reasonable way, but I can think of scenarios during that period, particularly in 2004 and so forth, when it might have been a real problem. So you do have the statement at the end that we’re always contingent on events. I like that statement; but what I don’t want to see is moving from that to what we did in that period, except in the most unusual circumstances. At the beginning it was justifiable in terms of concerns about deflation, but it actually had real potential problems that did not arise, but I think we got lucky. So I’m very comfortable with where we are right now. I think the editing process is going well in terms of the meeting—there is fine-tuning going on, but it’s done in a very constructive way, and I think it’s working well.

In terms of governance, I guess I lean toward the idea that we should vote on it, for the following reason. When you think about doing policy, it’s not just what you do today that’s important. What you are signaling about the future is every bit as important. This is the whole issue that the Chairman has worked with Mike Woodford on—the issue of managing expectations is not just what you do with the federal funds rate now; it’s also the path. In fact, the projections that we are talking about doing are very much consistent with that way of thinking. So the reality is that, from a policy viewpoint, what we say in the statement is as important as what we do in voting on the federal funds rate. Indeed, since I’ve been on the Board, that’s been really the only issue because we really haven’t had much debate about the federal funds rate decision. So in that sense, if it is really important and it is a key part of policy, it makes sense for us to vote on it. I’m not worried about the issue of dissents because the point that you made, Governor Kohn, that there should be a very high barrier is exactly the way people have been proceeding. The barrier is fairly high for the federal funds rate decision, but in this case even more so. It’s just a couple of words, and if you dissent, well, to be honest, then you’re a jerk. [Laughter] I don’t see any jerks here. So my feeling is that I don’t think we’re going to have a big problem.

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