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

Thank you, Mr. Chairman. Well, earlier in talking about the economy I said that I thought the extended outlook was reasonably favorable in terms of prospects for growth and that I also expected a modest diminution in core inflation, assuming that policy would be sustained approximately where it is. That leads me directly to favoring alternative B as the policy choice. Putting it the other way around, I do not see compelling reasons to make a change at this point, so I think we should stay where we are.

As far as language is concerned, the bulk of the language under alternative B is fine with me. But I do have one suggestion, which is that we replace the second sentence in section 3, alternative B, which talks about inflation, with the second sentence in section 3, alternative C, which emphasizes uncertainty. I advocate that for several reasons, but really they boil down to my thinking that it better describes the situation in which we find ourselves. So let me just elaborate a little. We know that the NAIRU is at best an imprecise concept. We know that accurate measurement of productivity is difficult and that, therefore, so is estimation of potential real GDP, the output gap, and so on and so forth. Indeed, simulations in the Greenbook address those two issues precisely, and there has been a fair amount of discussion recently at this meeting about uncertainty about the NAIRU and about productivity and so on. That leads me to my suggestion. I would also observe that it is certainly not far-fetched to imagine—although this is not my forecast— that the unemployment rate or some other measure of slack may move up for a time while inflation remains stubbornly where it is or even increases a touch. So all of that leads me to favor the language from alternative C for that one sentence.

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