To be sure, the Federal Open Market Committee's current judgment is that its accommodative posture is appropriate to foster sustainable expansion of economic activity. But the evidence indicates clearly that such a policy stance will not be compatible indefinitely with price stability and sustainable growth; the real federal funds rate will eventually need to rise toward a more neutral level. However, with inflation very low and substantial slack in the economy, the Federal Reserve can be patient in removing its current policy accommodation.

The use of "fan charts" to indicate the range of uncertainty would be helpful in this regard[forecasting future Fed policy]; and indeed, providing more information about uncertainty for all FOMC forecasts would be a useful innovation.

The FOMC stands prepared to maintain a highly accommodative stance of policy for as long as needed to promote satisfactory economic performance. In the judgment of the Committee, policy accommodation aimed at raising the growth of output, boosting the utilization of resources, and warding off unwelcome disinflation can be maintained for a considerable period without ultimately stoking inflationary pressures.

But what interest rates will be associated with a return to healthy growth in spending remains an open question. Incoming data have remained mixed, but on balance suggest that the economy has been expanding very slowly...All in all, I think it is too early to have a strong conviction that the economy is reaching the end of this period of quite slow growth. As the FOMC noted yesterday, the risks remain toward economic weakness.

Normally, I would agree with Bill Poole about intermeeting moves. I don’t think it’s a good idea to count on them very often. But the interval between our March 20th and May 15th meetings is a long one and we know, as does everybody else, that we’re probably going to cut rates further. To delay that gives a rather perverse incentive to the market that makes it more attractive to sell stocks in order to buy bonds. While I accept your point that it would be desirable for the stock market to get its legs on its own and not through action by the Federal Reserve, there is another thing to consider. And that is that we have just had two days of really good stock market performance.

So if we were to cut the target funds rate today, we couldn’t be accused of doing so because of the stock market. Later in this 10-day window, that may not be the case. We may get to the point where we want to cut the rate in the next 10 days and the stock market environment will make the Greenspan “put” come alive again. So, I was disappointed to hear that you didn’t want to make a move today. I think we really should cut the funds rate today.

Nonetheless, in the face of the energy price spike and the erosion of optimism in financial markets, consumer confidence, or sentiment, appears to be holding up reasonably well to date, though there have been some mixed signals of late...

...[I]n an economy that already has lost some momentum, one must remain alert to the possibility that greater caution and weakening asset values in financial markets could signal or precipitate an excessive softening in household and business spending.

In light of these difficulties, the first priority of the MPC might be to improve the clarity and usefulness of its current forecast made under constant interest rates. To further aid the public in forming expectations about future interest rate changes, the Committee might consider extending the forecast beyond two years either formally in the fan chart, or informally in a discussion of tendencies. Such an extension, together with information about the risks to the forecast, should help the public make informed judgments about the likely course of interest rates. In addition, the Committee might encourage research on how it could determine and publish any views it had about the possible future evolution of the policy rate.

For now, Mr. Greenspan told the National Italian American Foundation, the economy looks to be in balance -- a remark that suggested the Federal Reserve is in no rush to cut interest rates again.

  "For the moment, we have a relatively balanced set of forces," he said, adding, "It's difficult to read and I'm sure they're not going to stay that way terribly long."

As reported by Reuters

There may come a time when we hold our policy stance unchanged, or even ease, despite adverse price data, should we see signs that underlying forces are acting ultimately to reduce inflation pressures.

The 50-mile-an-hour headwinds which troubled greater growth several years ago have now come down to perhaps 20 or 25 miles an hour. 

As reported by Reuters News

In his half-yearly Humphrey-Hawkins report, Mr Greenspan confirmed that the Fed has eased its monetary policy - dealers believe that the target rate for Federal funds was cut by 1/4 of a point to 8 per cent last week - but said this was designed to increase credit availability and not simply to lower interest rates. 'Credit tightening is something we would not like to see happening,' Mr Greenspan told the committee.

As reported by Financial Times

Mr. Alan Greenspan, the Fed chairman, was at pains to stress in his congressional testimony on July 18th that this was a response to recent credit tightening, not to concern about a possible recession.

As reported by The Economist

Mr. Greenspan declined to characterize last week's action as easing, instead describing it as a move to offset credit tightening by banks.

As reported by The Washington Times