we want to encourage the industry to take advantage of rapidly evolving technologies and alternatives. in short, regulators need to balance competing issues. we have an important ongoing interest in the safety and soundness of individual institutions as well as in systemic financial stability. but we also recognize that, even though the largest nationally and internationally active institutions have a key role to play in financial stability, they also participate in a competitive marketplace. thus, we need to be careful not to place undue burden on a handful of institutions. i expect that the marketplace will create its own incentives for institutions to invest in business resumption, as customers begin to demand assurances that their financial institutions can indeed continue to provide services if a regional or widespread operational disruption occurs. conclusion although these issues are complicated, we cannot afford to ignore the lessons learned from 9 / 11. as consensus emerges, we will have to expand our dialogue and encourage foreign financial systems, counterparties, and customers to seek levels of resilience necessary for the smooth operation of global financial markets. we have seen a sincere willingness on the part of industry participants to discuss business - resumption issues frankly and openly. i hope that industry members will incorporate best practices as appropriate to their particular business activities and in light of their role in the financial markets. we may have to prod a bit, but i am confident that, in the end, we will achieve an even higher degree of resilience for our financial system, which will be effective in responding to the panoply of imaginable - - and even some unimaginable - - events.

for release on delivery 5 : 00 p. m. edt april 17, 2017 monetary policy expectations and surprises remarks by stanley fischer vice chairman board of governors of the federal reserve system at the school of international and public affairs columbia university new york, new york april 17, 2017 i will address the topic of central bank communications, with a particular emphasis on those times when financial markets and the central bank have different expectations about what a central bank decision will be. such situations lead to surprises and often to market volatility. of course, not all surprises are equal. for one, communications that shift or solidify expectations that are diffuse or not strongly held are less likely to be disruptive than communications that run counter to strongly held market beliefs. further, there are worse things than surprises. the central bank must provide its views regarding the likely evolution of monetary policy, even when this view is not shared by market participants. a concern for surprising the market should not be a constraint on following or communicating the appropriate path of monetary policy. that said, there are good reasons to avoid unintended surprises in the conduct of policy. 1 why should central banks avoid surprising financial markets? in recent decades, it has been increasingly acknowledged that monetary policy implementation relies importantly on the management of market expectations. 2 in theory, clarity about the central bank ’ s reaction function - - that is, how the central bank adjusts the stance of monetary policy in response to changing economic conditions - - allows the market to alter financial conditions smoothly. this typically helps meet the bank ’ s policy targets, with the result that the markets are working in alignment with the policymaker ’ s goals. under i am grateful to joseph gruber and don kim of the federal reserve board for their assistance. the views expressed are mine and not necessarily those of the federal reserve board or the federal open market committee. bernanke ( 2004, 2013a ) and woodford ( 2005 ) underscore how central bank efforts to shape market expectations can enhance policy effectiveness. the critical role of market expectations in determining asset prices and reactions to policy changes has long been recognized ; it is the explicit recognition of this link in formal models and the analysis of policy that is the recent major achievement. - 2this theory, repeated market surprises that raise questions about the central bank ’ s reaction function could threaten to disrupt the relationship between the central bank and the markets, making the central bank ’ s job more difficult in the future. 3 how can the fed avoid surprising