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

Thank you, Mr. Chairman. I favor alternative B and think that there is a very heavy presumption against our changing the language much from our March statement. From all that I’ve heard today, I don’t think we have even convinced ourselves that we have matched that presumption or overcome that burden of persuasion. So though I’ve had some sympathy in isolation to the Stern suggestion, I don’t think this is the right time to take it up in light of our experience of the last statement. For several days, we had the markets focused on us rather than on the data. What you, Mr. Chairman, and others have done over the most recent period is to try to get the markets to be dependent on the data rather than to look at us. These changes in language—whether the Stern amendment or something else at this point—do just the reverse of that. I don’t think this is a good time for nuance in the markets, and so I don’t think our substitution there would be good. I don’t think we can agree, even among ourselves, what the Stern amendment would do—whether it’s hawkish or dovish; and if we can’t, I hardly think it’s a good prescription for us to send it out to the markets and have them figure it out for us. [Laughter]

So I strongly favor alternative B. I think the markets will read the change in section 2— where we say, “Economic growth slowed in the first part of this year”—as “We believe April as well was quite mediocre.” I think that’s what it means. That’s what we believe, and so that change is justified by the facts. In terms of the “on balance” language in section 3, I could live either way, but I don’t see a compelling reason for adding “on balance.” I think the markets still want to see in us a reflection of what they believe. They believe that we’re cutting, that our credibility on inflation is real, but that we’re just being a little cute now. I wouldn’t want to give them an excuse to say that we’ve taken our foot off the accelerator, that we’re less concerned about inflation. It is just one data point, so I’d prefer to leave it without “on balance” as it was previously. That’s it. Thank you.

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