[Semantics]

fuSS buDGEtING
From comments at meetings held in 2006 by the Federal Reserves Open Market Committee, which is responsible for setting interest rates and guiding monetary policy. After each meeting, the committee releases a statement explaining its policy intentions. The transcripts were released this January. I do not know whether it is possible to construct a whole bunch of words that capture the Committee sense. When I see key words like still, I think thats roughly equivalent to nevertheless. but as yet suggests to me almost an inevitability. that is, we expect inflation to be coming. As yet we dont see it, but it is almost inevitable. I was tempted to suggest adding somewhat after the word moderating, but moderating is moderating. We are moving into a stage at which well need a few more words to explain why were doing what were doing. the Chairman characterized recent inflation readings as unwelcomea very important word. We should use that word again today in our statement. Im afraid that failing to do so would unnecessarily perpetuate ambiguity about our intentions. I wouldnt use the word unwelcome. We should say too rapid, too high, or something direct. Why we would want to be coy isnt clear to me. We ought to avoid the temptation to say more, and explain more fully, and give more guidance and more precision to our guidance. I would prefer not to use the language about mild restraint. Its hard to know exactly how much restraint we have. I am open to saying unwelcomeit serves as a signal that we are anchoring expectations. I fear that our historical use of unwelcome would go against what were collectively trying to accomplish. I think that people in the markets are going to focus on the word some. After some time, theyre going to recognize that some actually weakens the statement somewhat. I think we ought not to be referring to housing explicitly. We could simply say reflecting the lagged effects and leave out the housing part. Well, in terms of what we know today, I think we ought to be noncommittal. I guess I would argue for keeping housing in on the grounds that its happening. It is

the principal area in which we see some weakness going on in the economy, and not to make reference to that reality seems a little awkward. but it seems to me that Section 2 is really a statement about what has already happened in the economy, and housing is just not the biggest thing that has happened. I think it would be very odd to take housing out, partly because its factually accurate, and partly because, given our discussions around the table, we are concerned about gradual cooling. What is our euphemism for potential? Is it solid? Is solid the conventional use? In a way, I think there is a benefit at the margin to getting away from stock phrases. Im comfortable with the word moderate. I dont think that word would be harmful at all. Moderate to me means good but not great. Just say slightly or somewhat moderate. using the word potential I think will get us into trouble. I like the idea of conveying that the economy is likely to be coming back, perhaps not at the robust pace that weve seen in the past but at a reasonable or moderate pace. If you go to the dictionary, the first meaning of moderate is being within reasonable limits. but it also means of limited or average quality, and, in the federal statistics, there is a term of art, moderate income, which refers to households supported by average or slightly below-average income. Would it make sense to use the word poised rather than likely, or do you think that would be a mistake? Im inclined toward saying less than were saying now. Does subdued sound weaker than weak? Or is weak weaker than subdued? Actually, the words are somewhat more subdued and slightly weaker. On that basis, Im comfortable with slightly weaker. there is a bit more uncertainty, so I think the word vigilance is important. With the dollar and the stock market falling, would we want the market to conclude that our language, repeated at every meeting since the pause in rate increases in August, should now be taken seriously? We might want to send that message, but we might not. When was the last time we used the phrase indicators have been mixed? Is there precedent for that? At some point, we are going to have to figure out a way to say that we are not giving you future guidance because we dont know what future guidance to give you.
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