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

Mr. Chairman, I spoke of my concern about the fattening of the tail in economic weakness and my continuing concern about the already fat tail of inflationary pressure. However, if I come around to the view of the staff and the view that seems to be expressed by many at this table—that growth is likely to return to its long-term potential in the forecast period, inflation risks remain either at elevated levels or at less-elevated levels, and liquidity is somewhere in the range between healthy and ubiquitous [laughter]—then the first thing I do is decide that I wouldn’t want to increase rates but I also wouldn’t want to decrease them.

The question is how we express ourselves. Like President Hoenig—I don’t want to take words out of his mouth—I’d be happy if we just included the opening policy decision and then the assessment-of-risk statement and took out much of the verbiage we have as a sort of Christmas surprise to the market, since they don’t expect a whole lot. But I know that’s not a serious proposal. Therefore, I come down on the side of alternative B, as amended by the Christmas colors. I’d take out the words “than anticipated”—I think President Minehan has a very good point—and the duplication of the word “pace” that you pointed out. I worry, because I cannot make an argument for decreasing the rate, about being careful that we don’t signal to the market that we might be tending in that direction. Although I think alternative A not inaccurately expresses what’s been said at this table, I worry that it may be sending the wrong signal. Therefore, I come down on the side, as President Hoenig does, of alternative B as amended by Cathy and the suggestion in the Christmas colors, even though I think the verbiage is excessive. I know that sounds odd coming from a Texan.

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