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

To start with the last question, just as a benchmark we ran an alternative model simulation in which the real exchange rate depreciated at a 5 percent annual rate over the forecast period, in contrast to the 1½ percent decline that we’ve actually built into the forecast. That 5 percent decline produced enough additional growth and a little extra inflation so that, if one were to apply a Taylor rule to that outcome, the funds rate path would be just about on track with current market expectations. So that certainly would be one way to reconcile the difference between our forecast and current market expectations of the funds rate.

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