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

Thank you, Mr. Chairman. Given our decision at the last meeting, I favor maintaining the pause today, and I favor alternative B. The judgment to pause, as well as the language around that, does in fact constrain our flexibility, and I think most of us recognized that going into our last meeting.

In reviewing the language, I think that B+ has some superficial appeal, but the appeal really is in understanding that’s what we meant to say or that’s how we meant the markets to react last time. That is, I do not think our statement today should redo, correct, or try to reinterpret the last one. We had one shot in August. We now have a shot in September. Some of the appeal of B+ is trying to drive those market reactions that we expected. Given what the market has done, it strikes me that changing the language about what we said last time carries a large burden. The language in the statement represents a relatively blunt instrument, and our view that it is somehow nuanced or that we can play nuances through it is hard to prove in the marketplace. I read alternative B as somewhat less hawkish than our August statement, and I would strongly support Governor Kroszner’s recommendation to strike “on balance” because, again, I do not want to overly encourage the market behavior that we have seen over the intermeeting period. So with that I recommend alternative B with the striking of “on balance.”

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