Q&A continues: Q: Change regulatory framework...>

FED: Q&A continues:

Q: Change regulatory framework to help resolve funding issues?

- A: Most important thing is to get the level of reserves back up. They move up

and down with volatility, with TOMOs and bill purchases they are on a path to

reach early Sep levels. [again mentions surprise that banks did not deploy

liquidity in repo market - why not?] Don't think Fed would lower requirements on

liquidity, capital. Would only take action if we could do so without sacrificing

financial stability.

Q: Re disinflation pressures globally.

- A: Have watched situation in Japan / Europe, note significant disinflationary

pressures from around the world. Don't think we're exempt from those pressures,

so we are committed to anchoring US inflation expectations. Once expectations

move down, inflation moves down, rates move down. We think the right thing to do

is to do what we can now to anchor at a level consistent with 2%.