MR. KOHN.
I confess that for ’07 I committed the sin of thinking things were more uncertain than usual , Mr. Chairman .
PREPARED STATEMENT OF ALAN GREENSPAN Chairman , Board of Governors of the Federal Reserve System February 16 , 2005 Mr. Chairman and Members of the Committee , I am pleased to be here today to present the Federal Reserve 's Monetary Policy Report to the Congress .
Neither the large surge in output per hour from the first quarter of 2003 to the second quarter of 2004 , nor the more recent moderation was easy to anticipate .
MR. EVANS.
Accordingly , I think that current real interest rates are appropriately accommodative relative to the baseline forecast for economic growth and the risk to that outlook .
MR. KOHN.
In sum , Mr. Chairman , I 'm a bit more comfortable with something like the path for the economy and inflation in the Greenbook forecast , but uncertainties are quite high .
MR. HOENIG.
If the decline reverses faster than expected , both would be significantly weaker as shown by the Greenbook alternative scenario .
MR. REINHART.
Indeed , the 1-year forward rate maturing 10 years hence -- line 4 -- shed 179 basis points over the past year .
In establishing these hearings -- Mr. Hawkins and Mr. Humphrey were mentioned -- the Congress proved prescient in anticipating the worldwide trend toward greater transparency and accountability of central banks in making monetary policy .
MS. PIANALTO.
I support your view , Mr. Chairman , that we should keep our focus on expanding the asset side of our balance sheet .
MR. KOHN.
Good growth in labor demand could suggest a stronger path for demand and less slack than the staff is estimating .
In particular , in September and November 2008 , the Federal Reserve established several credit facilities , including a Revolving Credit Facility , to further these objectives .
Mr. Greenspan , '' Mr. Chairman and members of the committee , I am pleased to be here to present the Federal Reserve 's Monetary Policy Report to the Congress .
Mr. Chairman , to what extent does the Federal Open Market Committee consider the long-term interest rate in pursuing changes to the Federal funds rate ?
MS. LIANG.
We also present projections based on the Greenbook recession alternative with the additional assumption that national house prices fall 20 percent .
In a way you 're investigating what caused this , but we 're still in the middle of this crisis from the point of view of the consumer , and -- and Main Street .
Higher levels of investment relative to consumption build up the capital stock and thus add to the productive potential of an economy .
Finally , I will address the Federal Reserve 's regulatory and supervisory responses to these challenges.Conditions in Financial Markets and the Economy Conditions and sentiment in financial markets have continued to improve in recent months .
Mr. Vice Chairman , you a moment ago articulated Congress ' mandate to the Federal Reserve with respect to maximum employment and to price stability .
MS. YELLEN.
-LSB- Laughter -RSB- Also in contrast to the Greenbook , I see no significant pressure for higher inflation coming from increased inflation expectations .
I think this loss of Federal Reserve independence is a serious issue , especially at this time of rapidly growing Federal debt and greatly expanded Federal Reserve balance sheet .
My fourth concern is that by giving so much new power to the Federal Reserve , that the plan would actually threaten the Fed 's independence regarding monetary policy .
MS. MINEHAN.
Turning to the nation , I was pleased to see that incoming data validated the substantial pickup in second-quarter growth that we , along with the Greenbook , had forecasted .
The Federal Reserve 's legal authority largely limits Federal Reserve purchases of securities to Treasury , agency , and agency-guaranteed securities .
Those factors influencing nominal Treasury yields have made it particularly difficult recently to draw inferences about expected inflation from the TIPS market .
MR. HOENIG.
We 've seen inflation rise over the last year in the presence of sizable slack and a rising funds rate .
MR. HOENIG.
86 , MR. HOENIG. , '' Mr. Chairman , I 'll start off by repeating the obvious : There have been a couple of surprises since our last FOMC meeting .
Mr. Bernanke , '' Again , forecasts are very uncertain , but I do not view deflation as a near-term risk for the United States .
CHAIRMAN BERNANKE.
Stocks have come back a bit from their so-called correction , although I should say that this is conditional on a lot of expected easing by the Federal Reserve .
MR. PLOSSER.
But the policy assumptions that I make to achieve the forecasted outcomes for the intermediate term are different from the Greenbook 's .
MR. DUDLEY.
We would n't expand these programs if we did n't have the ability to conduct offsetting reserve draining operations .
CHAIRMAN BERNANKE.
Financial conditions in the housing market remain important downside risks to growth , with the spurt in oil prices adding to those risks .
MR. LACKER.
So it 's not clear that inflation compensation and inflation expectation measures are contained in a way that 's consistent with a long-run inflation objective around 1.5 percent .
MR. SANTOMERO.
In addition , the fact that our firms have not yet changed their capital spending plans for 2006 suggests that their outlook remains positive .
MR. LACKER.
The extent to which energy price increases pass through to core inflation is fundamentally determined by the public 's expectations regarding future monetary policy .
MS. LIANG.
We expect that institutional investors will continue to pursue loans until expected returns decline , perhaps through tighter spreads or lower recovery rates on loans .
MR. KOS.
During the intermeeting period , market participants confronted the surprise Chinese revaluation , strong domestic data , and high oil prices .
MR. MOSKOW.
81 , MR. MOSKOW. , '' With restraint , Mr. Chairman , most of our contacts this round were positive about current business conditions .
If regulation to strengthen shareholder rights does not occur at the Federal level , it will be up to the States to move forward .