##ify a shift in our monetary policy approach. instead, they represent the natural evolution of the language describing the factors influencing our policy decisions in the context of the strength of the economic outlook and inflation being near our 2 percent longer - run goal. these changes in our communication of policy views are a sign that we are nearing the end of the process of normalizing monetary policy and are inching closer to conducting normal monetary policy. arguably, it ’ s been a long time since monetary policy was normal, so it ’ s worth describing what “ normal ” looks like in some detail. at its most basic level, monetary policy - making will remain the same : the path of interest rates will continue to be guided strategically by our dual mandate objectives and shaped tactically by the data and their implications for the economic outlook. we ’ ll continue to be transparent about our thinking about the economy and monetary policy. but, changing circumstances call for some changes in how the fomc communicates its policy views. now that interest rates are well away from zero and the economy is humming along, the case for strong forward guidance about future policy actions is becoming less compelling. for one, the future direction of policy will no longer be as clear as it was during the past few years. when interest rates were extremely low, it was obvious that the direction for rates was upward, toward more normal levels, and our forward guidance reinforced that point. at some point in the future, it will no longer be clear whether interest rates need to go up or down, and explicit forward guidance about the future path of policy will no longer be appropriate. in addition, as we have moved far away from near - zero interest rates, it makes sense to shift away from a focus on normalizing the stance of monetary policy relative to some benchmark “ neutral ” interest rate, often referred to as “ r - star. ” now, i have spent a good deal of my career studying r - star and i find it to be a useful concept for describing the economy ’ s longer - run behavior. having said that, at times r - star has actually gotten too much attention in commentary about fed policy. back when interest rates were well below neutral, r - star appropriately acted as a pole star for navigation. but, as we have gotten closer to the range of estimates of neutral, what appeared to be a bright point of light is really a fuzzy blur, reflecting the inherent uncertainty in measuring r - star. 4 more than that, r -

private enterprise, and supported by some form of a broad safety net. while the specifics can differ appreciably across countries, these safety nets are usually constructed along similar lines. they generally include oversight of the affairs of banking institutions in the form of inspection and examination of the institutions for compliance with a broad set of safety and soundness standards ; some type of protection against losses for small depositors and investors ; and some form of emergency liquidity facility for banking institutions and, occasionally, for other financial institutions as well. finally, the payments system, a crucial link in any financial system, generally includes some form of official regulation of or participation in its operations. these important aspects of the safety net often feed into one or more of the functions performed by central banks. for this reason, the central bank usually plays a major role in the operation of one or more of these facets of the safety net. for example, the emergency liquidity facility is almost always the discount window of the central bank. in many countries - including ireland and the united states - - the central bank also plays an important role in the supervision of banking institutions and in the oversight of payments system operations. the important role played by the central bank in helping to build and maintain confidence in the underlying stability of the financial system in turn implies that there must be a high degree of public confidence in the central bank itself. this brings me back full circle : achieving and maintaining that public confidence depends first and foremost on the success of the central bank in discharging its monetary policy responsibilities. a sound economy and sound money are virtually synonymous, which is why monetary policy stands at the center of central bank functions. the importance of monetary policy is also the reason why central banks need special independent status within the governments they serve. in my view, it is particularly critical that the central bank not be directly responsible for financing government budget deficits ; such a responsibility can, over time, compromise the financial integrity of the central bank, and thereby, public confidence in it. note, however, that even without any involvement in direct financing of government budget deficits, central banks have a major stake in the development and maintenance of a smoothly - functioning government securities market, which can provide substantial benefits to the economy beyond those emanating from private sector financing of government budget deficits. in closing, i want to stress that the commitment to price stability as the primary goal of monetary policy in no way implies that the health of the economy or of the financial