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

Thank you, Mr. Chairman. I support the Bluebook’s alternative B, both the policy and the language as it stands. With respect to the language, I strongly support the view that you, Governor Kohn, and others expressed—that a change today would be a mistake, given the significance that the markets would attach to it. I think the language is completely acceptable and we should stick with it. If we were to move, I wouldn’t have a problem with the language in C about inflation and uncertainty, but I would also want to add something about uncertainty with respect to growth, and I see no need to make this change today. It seems to me that we do need considerable flexibility at this point to respond to emerging data. The intermeeting developments have strengthened the case for a soft landing, but there is significant risk on both sides with respect to inflation and growth. I’m still comfortable stating that the predominant policy concern is the risk that inflation will fail to moderate as expected. I am worried about labor markets that remain fairly tight, oil and commodity prices that are higher, and the dollar, which has fallen. At the same time, the recent favorable inflation data have reinforced my view that a substantial part of the uptick in inflation last year was transitory. I think that the discussion we have had so far reinforces the point that going forward we are going to have trouble crafting policy and a statement if we don’t clarify— at least within the Committee, if not publicly—what our ultimate inflation objective is. I’m not going to weigh in again at this point on the merits, but it is obvious that we will have increasing difficulty. I am happy today to say that core inflation remains “somewhat elevated on balance.” But if we get more readings of core PCE inflation that are in the neighborhood of 2 percent and they continue, we really will have to revisit the debate about what we want to achieve and how we can reflect that decision in our statement.

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