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

A quick comment was just brought to mind because of Tim’s comments. I regularly meet with a group of investment people before FOMC meetings. Compared with the past several months—particularly during the time of the last meeting, when we were just coming off some financial market upset, especially in the equity markets—they were saying that they felt that financial markets were frothier right now than they had been over the past three or four years; there was more money out there chasing more deals and a level of froth that to them seemed unsustainable. I don’t know what implications that has for current policysetting—I’m not wise enough to know that. But I do see it, as Tim indicated that he did, as a risk that lies over the whole environment. Even though we have slower growth and somewhat higher inflation, this overall forecast is so benign; and despite what the yield curve and the fed funds futures tell us, the market seems to be buying into the whole benign outlook and thinking that it’s going to continue forever. Clearly it won’t. What the spillover effects will be and what we can do about them now or in succeeding meetings are questions to which I don’t have an answer; but I do think they are questions, and I would like to reiterate what Tim had to say.

Keyboard shortcuts

j previous speech k next speech