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

Thank you, Mr. Chairman. I have two questions that are sort of related. The first question has to do with the acceleration in core PCE prices that we saw earlier this year and were all obviously very concerned about. One rationale we’ve offered in trying to understand that acceleration was the pass-through effects from the previous year’s rise in energy prices from about $50 a barrel to something like $75 a barrel. Given that energy prices have now fallen and it looks as though they’re stabilizing around $60 a barrel at least for now, how do you measure the effect on the pass-through into core PCE prices from that roughly 20 percent drop in oil prices? I can see the measurement going on in the headline; but as I look at your forecasts of core, they haven’t responded to that same effect. Is there much pass-through in the model to core PCE prices from energy prices, or is there not? I’m trying to understand how you guys think about that.

The second question is related to inflation as well. In trying to understand this automobile thing—which I clearly do not entirely understand at this point—I saw your suggestion that an apparently anomalous large drop occurred in the PPI for trucks or something like that. Was that real or accurate? Are there any ramifications from that anomalous drop in the PPI? Does that measurement problem carry over to other price indexes—for example, the CPI? If it does carry over, does that mean that our estimates of the CPI are perhaps understated in the near term because of the same measurement problem? I don’t know whether or not there’s any relation between those two. Those are my two questions.

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