3 region next, let me discuss the challenges and opportunities in the asean + 3 region. while central banks continue to make rapid policy interest hikes, especially in advanced economies, some market participants have expressed concerns about global financial conditions. their main concern is that adjustments in asset prices, fluctuations in foreign exchange markets, and acceleration of capital outflows could lead to another financial crisis in the region. however, over the past 25 years, the double mismatch of currencies and maturities over the longer term, which was one of the underlying causes for the asian financial crisis, is said to have been resolved to a large extent. economic fundamentals have strengthened, and foreign currency reserves have increased. through their efforts to 2 / 4 bis - central bankers'speeches build regional cooperation, the asean + 3 members have succeeded in establishing several key mechanisms to prevent or mitigate any future financial crisis. first among these is the chiang mai initiative multilateralisation ( cmim ), which aims to deal with balance of payments and short - term liquidity difficulties and maintain economic and financial stability. secondly, asean + 3 members have advanced the asian bond markets initiative to develop local currency bond markets. furthermore, the executives'meeting of east asia pacific ( emeap ) central banks, a group of 11 central banks and monetary authorities in the east asia and pacific region, has been working on the asian bond fund ( abf ) initiative since 2003, in order to develop local currency bond markets. the emeap central banks have also been promoting the analysis of financial market developments in the region. such regional cooperation has enabled countries and firms to finance in local currency for longer maturity. against this backdrop, the risk of a sudden loss of confidence and outflow of funds leading to a financial crisis does not seem to be significant at this juncture. nevertheless, we should not be complacent. price developments in advanced economies could, for example, trigger a further tightening of global financial conditions. in some of the region's countries, policy buffers may have decreased due to increased fiscal spending to counter the pandemic and to support households affected by sudden price increases. foreign exchange reserves have recently begun to decline in many countries, partly due to valuation adjustments. as the recent market turmoil in the united kingdom has shown, the reaction of market participants to policy decisions and announcements can significantly impact asset prices and market functionality. authorities in the asean + 3 region must be vigilant in the face of potential

charles l evans : a risk management approach to monetary policy speech by charles l evans, president of the federal reserve bank of chicago, at the ball state university center for business and economic research outlook luncheon, muncie, in, 5 december 2011. * * * introduction it is my pleasure to be here in muncie today to speak to you about my views on the progress of the recovery and on the course of monetary policy. i would like to thank steve smith, president of the muncie forecasting roundtable, for that kind introduction. for those of you who follow monetary policy deliberations, you will certainly be aware that i was the lone dissenter at the last policy meeting held in early november. so it should come as no surprise when i say that the views that i am presenting today are my own and not necessarily those of the federal open market committee ( fomc ) or my other colleagues in the federal reserve system. real output gap four years ago the u. s. economy entered what developed into the deepest recession since the great depression. two and a half years ago the recovery began. yet, despite both accommodative monetary policy and fiscal stimulus, the pace of improvement has been agonizingly slow. real gross domestic product ( gdp ) is only just back to where it stood at its pre - recession peak in 2007, employment growth is barely enough to keep pace with natural growth in the labor force and the unemployment rate remains extraordinarily high. earlier this year, most forecasters thought that the recovery was gaining traction and that economic activity would increase at a solid – though not spectacular – pace through 2012. the labor market was beginning to show some long - awaited improvement, and the financial repair process seemed to be making progress. analysts thought that higher prices for energy and other commodities would weigh on output growth, as would supply - chain disruptions from the disaster in japan. but these factors were expected to be transitory, and most forecasters thought growth would improve significantly once these influences had passed. unfortunately, the news over the past several months has proved this forecast to be too optimistic. to use an automotive analogy, employment and growth are stuck in neutral. job growth has been disappointing, and the unemployment rate just last month dipped below 9 percent. revised data indicate that annualized real gdp growth in the first half of 2011 was only 1 percent and improved only modestly to a 2 percent pace in the third quarter. consumer spending has