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

From our perspective—I haven’t said this in years, so I allow myself this one time—there is more uncertainty at this point. Both tails of the distribution feel wider to me than they have in the past. Now, my having said that, is it impossible to imagine that we could have something that we haven’t seen previously—a decline in housing of 20 to 30 percent and a modest rise in the unemployment rate? I think you would have to say that over the past six years the economy has shown remarkable resilience and an ability to absorb some pretty significant shocks without triggering a cyclical downturn. So it is not impossible for me to imagine that we will again in this period. Monetary policy is obviously not currently pushing hard into the cycle—that is, exacerbating the downturn as it was in the early 1980s. With the drop in energy prices and the generally sound financial conditions that we see in the corporate sector, there are some reasons for thinking there is a reasonably solid base upon which this shock is going to occur. But having said that, I think the situation is uncomfortable.

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