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

Well, Mr. Chairman, I am somewhere between Mr. Moskow and our distinguished president from Minneapolis, but I am biased toward B+. My board, as I indicated earlier, was in favor of ratcheting up the discount rate. One of their concerns that I did not voice in our discussion previously was about how permanent or, rather, how temporary this reduction in energy price is likely to be, and as you know, we have a heavy weight of significant oil operators on our board. The only statement one can make with assurance—and Karen referred to this during the analysis period—is that we are likely to have volatility. We cannot take or assume great confidence in terms of continued direction.

In alternative B, section 3, the words that I find most objectionable are “reflecting reduced impetus from energy prices.” It is a little too soon to tell, and the language sends a mixed signal because we spent, under our previous leadership, a tremendous amount of time emphasizing core PCE, which excludes energy. I take your point, which is absolutely appropriate in my view, that we need to be aware that the rest of the world looks at the CPI and does not necessarily think about core PCE ex-food and ex-energy because they have to eat and they have to drive. I would be in favor of the B+ column, Mr. Chairman. I would consider striking the words “policy is more likely to firm than ease going forward,” but Vince makes a good point: There is some value to the force of repetition. What I worry about most is expectations creep, and I do agree that what I am hearing from outside and what I heard not just at Jackson Hole but elsewhere is that we are too willing to accept an inflation target that ranges up to 3 percent. I would be adamantly against accepting that kind of inflation. So I think it is important to reiterate our bias and to do it with a deft hand. We should not do it in such a way that tilts us into the risk that you pointed out in your charts of triggering recession, but we nonetheless should indicate that we are firm. So I am a B+ man, even at this table of A+ students.

Keyboard shortcuts

j previous speech k next speech