Prior discussion:
speaker: MR. MOSKOW.
text: In particular, retailers told us that they saw something of a bounceback; and looking ahead, merchants sound quite bullish about the upcoming holiday season and are planning to build their inventories accordingly. As you know, light vehicle sales also bounced back in July. So far, reports suggest that sales in the first week of August continued to be strong. One manufacturer even told us that they are looking for sales in the month to be about 181/2 million units. 
speaker: CHAIRMAN GREENSPAN.
text: Excuse me--was that for light vehicle or total sales? 

MR. MOSKOW. "Of course, there are reasons to think that uncertainty might have risen; we've just talked about the oil prices, terrorist threats, and so on."

Full utterance: Light. Automakers will need a good August and September to clear dealer lots of their '04 model year cars; otherwise, they will need to reduce production schedules for their '05 models. Other sectors never really experienced much of a slowdown in June, and their activity remains strong. This pattern has been evident in new orders for construction, agricultural, mining, and some IT equipment as well as in demand for advertising. Air travel has continued to move higher during the summer, with bookings solid for the fall. In contrast, information we have heard about IT services suggests weakness. On the second question, the outlook for inflation, our District contacts continue to talk about cost pressures, but there are few indications of pass-through to prices so far. There's not much news on wages, but rising health care costs remain a major concern. And costs for some material inputs, notably construction materials, steel, and energy remain elevated. Our contacts still expect these costs to ease, but it is taking longer than they had anticipated. Similarly, the supply chain bottlenecks that I discussed last time are also taking longer to resolve. Capacity constraints are particularly severe in transportation, and there are concerns that these could persist and cause substantial problems during the peak fall shipping season. As I noted, despite all these cost pressures, we're hearing only limited reports of price increases downstream. Turning to the national outlook, we think that the economy's soft patch is temporary. The July employment report makes us nervous but doesn't change this assessment. Assuming that the recent payroll data are not spurious, what risks do they suggest? One possibility is that we're back to an environment similar to last year, when uncertainty held back hiring even though growth continued. Of course, there are reasons to think that uncertainty might have risen; we've just talked about the oil prices, terrorist threats, and so on. However, our business contacts have not talked explicitly about increased uncertainty holding back their hiring, and we know that indications of spending showed activity picking up again in July. Moreover, we think the fundamentals continue to be strong: Real income growth has been maintained despite the weak employment growth and higher energy prices, we still have strong underlying productivity growth, and monetary policy remains very accommodative. We are concerned about the persistently high oil prices. Their movements seem to be driven largely by geopolitical concerns, as Karen was discussing, so oil is a wild card both for growth and for inflation. We all know that these sorts of supply shocks make for difficult policy decisions. Still, with regard to prices, the data suggest that core inflation remains well contained. So at this time continuing to remove policy accommodation at a measured pace seems appropriate.

Opinion: yes
About monetary policy: no