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

I’m not sure I have an empirically based response. We can actually estimate from the model a confidence interval around a parameter estimate of the NAIRU, which as I indicated, is wide; but I don’t have a similar thing for inflation expectations. However, I would argue that, if you just look at the confidence intervals around inflation forecasts over the longer haul, they are pretty wide. Obviously you control inflation over the longer haul. If you would tell me what your tolerance is for five years from now, given our ability on a year-to-year basis to forecast inflation, plus or minus 1 percentage point, actual inflation would fall plus or minus 1 percentage point around whatever you tell me your longer-run inflation objective would be. In terms of the measures that we look at—and I think those probably have not changed much since Vincent presented them in the Bluebook a while back—0.5 percentage point is just on the difference in the measures alone; it is not actually a measure of uncertainty around any individual measure. So it’s wide. I don’t know if you would want to add a confidence interval around that.

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