There is uncertainty about both where we are and where we are going. But not all these sources of uncertainty are above the materiality threshold that impinges on the actual monetary policy decision or on other economic decision-making. We need to avoid false precision in both our assessment of outcomes and forecasts and in our policy response to them.
The failure of Lehman posed risks. But the troubles at Lehman had been well known for some time, and investors clearly recognized – as evidenced, for example, by the high cost of insuring Lehman's debt in the market for credit default swaps – that the failure of the firm was a significant possibility.