Lockhart in Q&A on Dollar Markets

I just listened to the Q&A from Lockhart's speech on Friday. This was quite interesting, especially in light of Mishkin's last speech on globalization:

"I should repeat the question, a very good question. What's my response to the view that the fed funds as a monetary tool and future fed funds cuts might not be so effective given the intertwined nature of our economy and our financial markets with the global markets. Well it's a very good question and I am confident that the management of the federal funds rate given its effect on dollar markets and global markets remains a very powerful instrument. So I am not, let's say, a believer in the argument that we have been emasculated in our powers to influence the overall economy by virtue of globalization."

It seems increasingly clear that the FOMC views significant dollar depreciation, induced by fed funds cuts, as the most likely monetary transmission mechanism in the event of U.S. economic weakness.

You should be able to predict how imminent this scenario is by counting the frequency of denials like this (again from Lockhart's Q&A):

"The question is what do I see happening regarding the value of the dollar and this is another one of those questions and topics that we at the fed leave to another agency, in this case it's the treasury. So I have to duck that question. It's not our brief to predict the direction of the dollar."

For future reference, as of 10/1/2007: EURUSD = $1.423, USDJPY= ¥115.78