My colleagues and I have been deeply involved in assessing the impact of rising foreclosures on the financial markets and the U.S. economy, and in developing the Fed’s policy response. On the monetary policy front, we have undertaken several actions designed to stimulate demand in the face of contractions in the housing market and the tightening of credit. We have also sought to bolster market liquidity and promote orderly market functioning through several new lending facilities. We continue to carefully monitor trends in the financial markets and the economy, and we are committed to acting in a timely manner to address new developments.

A less aggressive cut would have been more appropriate.

From Q&A as reported by Bloomberg News, referring to the March 18 0.75-point rate cut.

We are thinking of the forecasts for the real economy not where it is today.

From Q&A as reported by Market News International

It is too soon to call whether or not we are in a recession. But regardless of what you call it, it is a period of very slow growth. Slow growth does have the implication that you would expect a gradual increase in the unemployment rate.

From press Q&A, as reported by Reuters.

I would say that while to date the problem banks have been quite low, there clearly has been some deterioration since the beginning of this year, and should the economy continue to slow down, as many expect, it is likely that we will continue to see some growth in the problem institutions.

From Q&A as reported by Reuters

[I]t's clear the economy is in a slowdown that resembles past periods that were the leading edge of a recession. Economic growth has been slowing since the third quarter of last year coming off solid growth rates in the second and third quarters of 2007. Following a sluggish fourth quarter, I expect that GDP for the first quarter of this year will show little, if any, growth.    

It's possible—given certain strengths such as strong business balance sheets and export growth—that the economy will not pass the threshold into a technical recession. In considering the current economic situation, I believe that an important policy objective at this juncture is to ensure that this slowdown is short and shallow.

A critical factor—possibly the critical factor—in the determination of the length and depth of the current slowdown is the performance of the housing sector.

With regard to financial conditions more broadly, markets have not yet stabilized. Although financial instability originated in the residential mortgage-backed securities market, it has spread to affect a variety of credit markets via market linkages or institutional interdependencies. The experience has been traumatic, at times generating primal emotions. Market volatility has been driven by fear, distrust, and flight to safety. I emphasize this point because financial system stability is a central focus of Fed policy at the moment.

At the same time, inflation has become a more prominent concern.

Looking ahead, my forecast has been affected both by an economic slowdown that has been sharper than I had expected and the recurring spells of financial market turmoil. A few months ago our forecast at the Atlanta Fed saw growth slow in the first half of 2008, then pick up in the second half of the year. But it now appears to me that the contraction in housing and the dampening effects of financial turmoil on household and business spending could persist through the remainder of this year. The recovery in growth I had expected in the second half of this year may be delayed.

The tax rebates should provide some stimulus in the second and early third quarters of this year. But given the uncertain atmosphere I expect will continue to prevail in May and June, I do not expect full flow through of the rebates into personal consumption expenditures.

I expect it will take much of the rest of the year for house prices to bottom out and financial markets to restore the necessary preconditions of stability—that is, confidence in asset values and confidence in transaction counterparties.

Looking ahead further to 2009, my outlook becomes more optimistic. It will take longer than I earlier expected to return to solid growth, but by the fourth quarter of 2008 the conditions should be in place to support a return to healthy growth next year.

These are challenging times for our economy and financial markets. We know from studying economic history that booms are often followed by busts, and this pattern has repeated itself in our housing markets lately. However, we also know that these stressful periods will abate and that our economy will improve over time.

The potential for headwinds is integral to thinking about U.S. economic prospects over the next year or two. To the extent that headwinds gain momentum, they suggest relatively modest growth for a time and the likelihood of increases in the unemployment rate.

People should be under no illusions that even if policy is reasonably effective and reasonably timely that given the disruptions we've had with the financial sector and implications for the outlook...some of this (weakness) is now baked in the cake.

From Q&A as reported by Reuters

I have been a bit disappointed by the incoming inflation data because they have been a bit above what I earlier thought.

From Q&A as reported by Market News International

If we again begin to grow, at a time when inflation is still at a very high base level, then we could (create) conditions for sustainable inflation over the long term.

...

Consumer price inflation is rising, and the personal consumption expenditure basket is rising to uncomfortable levels. ... What we are trying to do ... is condition expectations of where we go, going forward, to make sure that inflation doesn't get out of control. Because we know that there is a lag in monetary policy

As reported by Reuters

We are slowing down. We are in for a prolonged period of slowdown because of the excess speculation that took place in housing. ... and the fact that liquidity ... is not getting out to the system as regularly as it should.

As reported by Reuters.