A sequence of data releases consistent with the rough patch for economic activity that I expect in coming months would not, by themselves, suggest to me that the current stance of monetary policy is inappropriate. 

Note:  Some hours after Gov. Kroszner suggested that further rate cuts might not be necessary, the chairman of the Senate Banking Committee, Chris Dodd,  told the press that he might not act on Kroszner's confirmation for a full term as governor until after the 2008 elections.

[I]f the fourth quarter comes in exactly as anticipated, and given that there's already been 75 basis points of easing, and given that we can't affect the fourth quarter anyway - the fourth quarter is going to be irrelevant to the December decision unless it tells us something about next year we don't already know.

At present, Hoenig said he is "not at all opposed to necessary action either way." 

"So when I say, and I always do in my speeches, it is a matter of waiting watching and seeing, I really mean it this time," he said.

As reported by MarketWatch

I think we have to be ready for surprising developments in either direction. We have to be prepared to be nimble in either direction. Because it could be that all sorts of things would shake out relatively easily and comfortably and it could be that they won’t. I just don’t know.

In an interview with the Wall Street Journal

The strains in financial markets that were so evident and worrisome in mid-September appear to have lessened somewhat. During the past few weeks, as market participants have gained a better understanding of their financial positions and the positions of others, financial markets have become more stable. The Federal Open Market Committee meets again on October 30^th and 31^st, and we will once more assess developments and act as needed to foster price stability and maximum sustainable economic growth.

[T]he Committee chose to cut its target for the federal funds rate by 50 basis points at the September meeting. This action was intended to help offset the tightening of credit conditions resulting from the financial turmoil. Risk-management considerations also played a role in the decision, given the possibility that the housing correction and tighter credit could presage a broader weakening in economic conditions that would be difficult to arrest. By doing more sooner, policy might be able to forestall some part of the potential adverse effects of the disruptions in financial markets. As most of the meeting participants saw growth likely to run below trend for a while and with the incoming inflation data on the favorable side, the risks to inflation from this action seemed acceptable, especially as the Committee was prepared to reverse the policy easing if inflation pressures proved stronger than expected.

I believe that it was important to put a substantial easing in place in September so as not to fall “behind the curve.” Given the long lags between policy actions and their impact on the economy, and the possibility that economic downturns can be difficult to reverse once they take hold, a more gradual and reactive approach would have created unnecessary economic risks. That said, it is inherently difficult to assess the stance of policy that is needed to ensure that the economy would grow at a moderate pace given uncertainties about financial developments and their impact on the economy.

I nevertheless considered the larger-than-usual cut in the funds rate prudent because of two features of the current environment. First, the stance of monetary policy before the September meeting was probably a bit on the restrictive side, at least according to many estimates of the so-called “neutral” or “equilibrium” federal funds rate. In fact, the stance of policy was growing more restrictive as core inflation gradually trended down. Second, with the economy operating near potential and inflation well contained, a case could have been made that the funds rate would need to move down toward a neutral stance, even if there had not been a financial shock.

Our policy easing was aimed at helping to offset the effects of those tighter credit conditions and thereby to encourage moderate economic growth over time.  It was not intended to, nor should it, short circuit a more realistic pricing of risk and the gains and losses that the repricing will entail for market participants.

Of course, we would not have eased policy if the outlook for inflation had not been favorable. 

But you should view these forecasts even more skeptically than usual...   We will need to be nimble in adjusting policy to promote growth and price stability.

Currently, I believe long-term inflation expectations remain anchored, and measures of current inflation have decelerated during the year from elevated levels in 2006. ...  Going into the Sept. 18 FOMC meeting, my opinion was that the balance of risks to the economy had shifted from higher inflation toward slower real growth. I believed, and still do, that the factor weighing most heavily on this change in the outlook has been the potential negative ramifications of the financial turmoil.  

``My intention was very much to signal neutrality on that decision. Where I come out on that question will depend on the spectrum of indicators and inputs we get, some of which are not necessarily data but anecdotal.''    

"I am neither signaling further cuts, or my recommendation of such, nor am I signaling I think we are finished.''

From the Q&A, as reported by Bloomberg News

We will also have to remain vigilant on the inflation front. The reduction in the funds rate runs the risk of higher inflation and expected inflation in the future. While the inflationary signs this summer have been encouraging, I do not think we are in a position to be sanguine. If inflation begins to creep up or expectations of future inflation rise in the coming months – which is a risk given our decision to cut rates – the outlook will be affected and policy may have to be adjusted.

Earlier this week, [the] Federal Open Market Committee lowered its target for the federal funds rate by 50 basis points.  The action was intended to help forestall some of the adverse effects on the broader economy that might arise from the disruptions in financial markets and to promote moderate growth over time.  Recent developments in financial markets have increased the uncertainty surrounding the economic outlook.  The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.