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

I’ll follow up on the question of Vice Chairman Geithner and President Moskow about the gravitational point of 2.0 percent. I remember asking you about the NAIRU and getting a response that suggested I should think of a cloud of probabilities surrounding that estimate. I’m essentially asking you for your characterization of the cloud you have in your mind around the idea that 2 percent is the number to which core inflation is going to have some gravitational pull. What comes to mind here is that Vince told us several meetings ago that 2 to 2½ on core PCE inflation was the range that he thought expectations were lying in, and TIPS numbers and survey numbers haven’t come down much since then as I recall. I am also interested in your commentary on the kind of technical adjustment factor that traverses the CPI, which the TIPS are based on, and the core. When you plot that, it moves around a lot. So I’m wondering whether you have sharp views about that going forward or how you’d characterize your uncertainty about that factor in helping us understand what the TIPS spreads imply about gravitational points.

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