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

Thank you, Mr. Chairman. I can support both elements of your recommendation. As I said in my earlier remarks, I’m somewhat torn between two kinds of risk. But as I think about the outlook for this year, it seems to me that the economy could unfold very much the way it did in ’95, ’96, and ’97. In that period we started to get a better sense of the productivity story and its implication that real equilibrium interest rates should rise. I want to be set up for that possibility. But I also want to be set up for the possibility that we won’t want to do anything. Given the degree of uncertainty that I feel about the appropriate strategy for this year and maybe next year, I think gradually starting to get to a position of greater flexibility is without a doubt the right thing to do. Nevertheless, I would not in any sense want to suggest that we’re eager to move. So, keeping the inflation balance a little to the downside and leaving the rate unchanged while starting to remove the “considerable period” commitment by modifying the language strikes me as the best way to give us the degree of flexibility we’ll need this year.

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