“Confidence in the Implementation of U.S. Monetary Policy Normalization” Remarks by Simon M. Potter Executive Vice President Federal Reserve Bank of New York at the 23rd EMEAP (Executives’ Meeting of East Asia-Pacific Central Banks) Governors’ Meeting Manila, Philippines August 4, 2018  Thank you for the invitation to participate in today’s discussion about globalization and its effect on monetary policy in emerging market economies. 1 U.S. financial markets, and the U.S. monetary policy stance, can significantly influence global financial conditions and capital flows. 2 In no small part, this reflects the extensive use of the dollar in international trade and in financial transactions conducted outside the United States. The pricing and availability of financing for business activity around the world—even activity that does not directly relate to an American borrower, lender, producer, or consumer—often are influenced by conditions in U.S.-dollar money markets. And, understandably, the evolution and stability of dollar funding markets are a focus of attention for many economic policymakers around the world, especially here in the East Asia-Pacific region. As always, the views I will express today are mine alone and do not necessarily reflect those of the New York Fed or the Federal Reserve System. My remarks today will focus on the implementation of monetary policy normalization in the United States and its contribution toward maintaining stability in U.S.-dollar money markets. I will start by reviewing progress on the Federal Open Market Committee (FOMC)’s program to normalize the stance of monetary policy.

The lack of structural reforms is, in my view, a major cause of the difference in the growth potential in Europe compared with the US and with some other advanced industrialized economies. The structural reforms identified in the Lisbon agenda have the potential to increase both labour productivity growth and labour utilisation, and therefore the long-term growth potential of the European economy. The experience of European countries which have undertaken some courageous and successful reforms show that it pays off. For instance, since the beginning of the EMU in 1999 the euro area has witnessed an increase of more than 12 million in the number of people employed, while from 1990 to 1998, the number of people employed only increased by around 3 millions. It is clear that major structural reforms are not easy to achieve, but pursuing resolutely such reforms is especially needed in the current environment, where the European economy is facing a number of important challenges, including rapid technological change, accelerating globalisation as well as ageing populations. According to the European Commission’s and  4  Source EUKLEMS. BIS Review 82/2007  3  ECB projections, the impact of ageing populations alone could reduce on average potential output growth in Europe by nearly half by 2040, if structural reforms are not carried out 5 . There is today a unique opportunity for European governments to take advantage of the present favourable growth developments to push ahead with the structural reforms that have been already agreed upon but are still far from being achieved.