The threshold policy I discussed earlier advocates keeping the federal funds rate near zero until either the unemployment rate falls below 7 percent (at least) or until medium-term inflation breaches 3 percent. The FOMC’s adoption of an explicit policy framework can underscore the distinction between these policy thresholds vs. our longer-run objectives. In particular, we would convey that the longer-run sustainable rate of unemployment is substantially lower than the threshold of 7 percent, while the inflation threshold of 3 percent is higher than the longer-run inflation objective. Consequently, even if inflation runs somewhat above its goal for a while, the public would understand that we intend to bring inflation down to the goal over time, and hence longer-run inflation expectations would remain firmly anchored. The communication of policy projections also works well in conjunction with the thresholds. By publishing projections for future short-term interest rates along with unemployment and inflation, the public can evaluate the Committee’s thinking about which combinations of unemployment and inflation will likely lead to a lift-off of policy rates. In comparing these projections against my thresholds, the public can evaluate how much more policy accommodation could potentially be allowed under my proposal. Providing these additional forecasts enhances transparency and the public’s ability to evaluate current monetary policy with alternative approaches. And a framework that explicitly clarifies the Committee’s commitment to both price-stability and achievable real-side mandate responsibilities will, I believe, often allow monetary policy to respond more strongly in the medium-term when adverse economic shocks impede growth and employment.

Whyconsumers prefer your competitors has also become an important factor. It matters to more consumers today whether companies are conducting business with integrity and ethically. Ultimately, consumers will almost always prefer to deal with companies that they trust. However, what customers look for to identify with companies that they can trust is changing. Advertising campaigns of some of the largest companies that are households names today, centre on universal values of charity towards our fellow mankind, honesty, and respect for one another. These are some of the clearest signs of businesses that understand the shifting preference of a fast growing, new generation of consumers, and are seeking to connect with customers on a deeper level. Innovation and its many faces As we contemplate these developments, the power and potential of innovation quickly shifts into sharp focus. Nowadays, we often hear innovation and disruption mentioned in the same breath. The flipside to that is really innovation and sustainability which are the themes of this conference. It used to be that if a business offered a decent product or service, and managed its costs reasonably well, prospects of survival were generally good. Today, survival – whether you are in the business of driving taxis, running a hotel, or offering a financial product or service – depends on the ability of companies to continuouslyharness and convert innovative ideas, however big or small, to serve customers better and multiply productivity gains. This is the challenge before the MSB industry.