, the public might begin to question our commitment to low inflation, and expectations could come under upward pressure. so far, we see no signs of this. if anything, some measures of longer - term inflation expectations in the united states have edged lower in recent years. third, can persistently strong economic conditions pose financial stability risks? of course, strong economic conditions are a good thing! such conditions can make the financial system better able to absorb shocks through strong balance sheets and investor confidence. but we have often seen confidence become overconfidence and lead to excessive borrowing and risk - taking, leaving the financial system more vulnerable. david h. romer, eds., reducing inflation : motivation and strategy ( chicago : university of chicago press ), pp. 195 - 246. for one recent example, see nathan r. babb and alan k. detmeister ( 2017 ), “ nonlinearities in the phillips curve for the united states : evidence using metropolitan data, ” finance and economics discussion series 2017 - 070 ( washington : board of governors of the federal reserve system, june ), http : / / dx. doi. org / 10. 17016 / feds. 2017. 070. - 6indeed, the fact that the two most recent u. s. recessions stemmed principally from financial imbalances, not high inflation, highlights the importance of closely monitoring financial conditions. today i see u. s. financial stability vulnerabilities as moderate and broadly in line with their long - run averages. while some asset prices are high by historical standards, i do not see broad signs of excessive borrowing or leverage. in addition, banks have far greater levels of capital and liquidity than before the crisis. fourth, while persistently strong economic conditions can pose risks to inflation and perhaps financial stability, we can also ask whether there may be lasting benefits. as i mentioned, a tight labor market could draw more people into the labor force. in fact, as the labor market has tightened, more workers have been moving back to work and off disability rolls. 9 there could also be benefits to productivity and potential growth. all told, though, the persistence of any such “ positive hysteresis ” benefits is uncertain, since, again, the historical evidence is sparse and inconclusive. conclusion as is often the case, in the current environment, significant uncertainty attends the process of making monetary policy. today, with the economy strong and risks to the outlook balanced, the case

for release on delivery 9 : 30 a. m. edt / 2 : 30 p. m. local time june 20, 2018 monetary policy at a time of uncertainty and tight labor markets remarks by jerome h. powell chairman board of governors of the federal reserve system at “ price and wage - setting in advanced economies, ” an ecb forum on central banking sintra, portugal june 20, 2018 nine years into an expansion that has sometimes proceeded slowly, the u. s. economy is performing very well. growth is meaningfully above most estimates of its long - term trend - - though admittedly, that trend is not as strong as we would like it to be. the labor market is particularly robust, with unemployment at its lowest level since april 2000. inflation has moved up close to our 2 percent objective, although we have yet to see it remain near that objective on a sustained basis. today, most americans who want jobs can find them. high demand for workers should support wage growth and labor force participation - - the latter a measure on which the united states now lags most other advanced economies. 1 a tight labor market may also lead businesses to invest more in technology and training, which should support productivity growth. and groups such as some racial and ethnic minorities that still have higher unemployment and lower participation rates could see increasing benefits from a tight labor market. 2 in short, there is a lot to like about low unemployment. achieving our statutory goal of maximum employment in a context of price stability and financial stability is both our responsibility and our challenge. earlier in the expansion, as the economy recovered, the need for highly accommodative monetary policy was clear. but with unemployment low and expected to decline further, inflation close to our objective, and the risks to the outlook roughly balanced, the case for continued gradual increases in the federal funds rate is strong. see organisation for economic co - operation and development ( 2018 ), economic survey of the united states 2018 ( paris : oecd ), www. oecd. org / eco / surveys / economic - survey - united - states. htm. these groups tend to both suffer most from labor market downturns and benefit most from improving labor markets. - 2current labor market conditions at 3. 8 percent, the unemployment rate is below most estimates of its long - run level, which are now clustered in the mid - 4s. many other labor market indicators also suggest an economy near full employment. to name just