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

Given the discussion today, there really is no reason to change our stance in policy or change my views on policy. There is a bit more uncertainty, so I think the word “vigilance” is important. Then we need to be able to move quickly, and it’s not clear to me that we are necessarily talking about quickly in terms of lowering interest rates; we might have to raise interest rates. So I think we just have to be aware of that.

I am comfortable with the current assessment of risk. I think it would be a mistake to move it now, which I don’t think anybody is suggesting, and it’s not clear to me that it wouldn’t be a bad idea going forward. Even if we have inflation declining, we’re in a situation in which we actually want to allow real rates to go up. In that sense, the assessment of risk as it is currently stated says exactly that. If we change the assessment of risk to be more balanced, the market may react and think we’re getting softer on inflation. So I am comfortable keeping it this way. Even though it’s not on the table today, it would take a lot more for me to want to change it.

On the issue of language, I guess I want to use the smidgen principle. My view is that things have not really changed very much. There’s a smidgen of weakness. Again, the nuances of this stuff are not my thing—I’m like President Plosser in that we’re sort of newbies. But the basic principle here is the less we change, the better it is. There’s the issue about whether alternative C would work by saying just “substantial.” That actually does indicate that we’re aware that things have gotten a little softer, so I would be comfortable with President Minehan’s suggestion. But I’m also not uncomfortable with just shortening exhibit 5, which says also that some recent indicators have been mixed, period. I’m not sure which one of those is better, but I think the key idea here is that we don’t want to change these a whole lot. We just want to acknowledge that, in fact, things have been slightly softer but the change is not a big deal. Thank you.

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