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

Your 2 percent scenario is close to what we are forecasting in the Greenbook—inflation expectations running more like 2 percent than the 1½ percent, with less inflation persistence. You are right. We created a scenario in which, if you thought about some of the equation estimates that have been presented, persistence has fallen just about to zero, in which case inflation pretty quickly reverts to what its average has been over the past decade. That was the basis for the “less inflation persistence” scenario. We obviously don’t think that is the most reasonable underlying assumption because we’re not forecasting that outcome; but we do think that it’s not entirely implausible and that you ought to at least have it on your radar screen as a possible outcome. It highlights some of the tension between the “less persistence” view of the world and the one in which we are expecting greater persistence.

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