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

First, on this issue of persistence, I want to mention that I think we should have some caution about interpreting the results. I do not quite know what the word “persistence” means because this is really a very reduced form estimate. A key issue is what mean it is that inflation is reverting to, and that can very much depend on what we do in terms of managing expectations. It is completely reasonable for you to have done the simulation that you call “less inflation persistence,” but I might call it something different. So just I think that’s important to think about.

What I would like you to do is to actually go a little beyond the forecast. I’d like to know what your thinking is on 2009, maybe 2010. I know you’re going to be a little uncomfortable about doing so because there is clearly a lot of uncertainty. However, when I think about what the state of the economy is and how we should do monetary policy, we need to look at longer periods. So I am not going to hold you to it and say, “Gee, you have to be able to give us a great forecast,” but I would actually like to know at least what your thinking may be on that issue.

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