the solid theoretical foundations that are valuable for policy analysis. 1 moreover, some evidence indicates that empirical models based on this research do fairly well at forecasting. of course, time will tell about their usefulness in the day - to - day operations of monetary policy. but the new research does demonstrate the continuing value of the expectations - focused approach that friedman and phelps championed forty years ago. changes in inflation dynamics as i noted earlier, the inflation process seems to have changed in a number of ways in recent years, both in the united states and in other countries. i would like to review these changes and then consider what they may tell us about the underlying processes driving inflation. one notable change is that movements in inflation now appear to tell us much less about future inflation than was the case, say, thirty years ago. here i am talking about predictions of inflation using only information on past inflation, without taking into account any other information. the evidence suggests that, at the peak of u. s. inflation in the late 1970s and early 1980s, the best such “ univariate ” forecast of inflation – into the indefinite future – was a simple average of inflation over the past few quarters ( stock and watson, 2007 ; cecchetti and others, 2007 ). in that period, sharp increases in inflation were reversed only slowly. by contrast, shocks to inflation since roughly the mid - 1980s have tended to be short - lived, so that the best forecast of future inflation would be a very long average of past inflation. thus, when inflation moves above its recent long - run average, most of the upswing will likely be quickly reversed, although this result is not guaranteed. that ’ s a remarkable change in the behavior of inflation. the international evidence indicates that the longevity of inflation shocks has been attenuated in many other countries as well ( cecchetti and others, 2007 ). moreover, the timing of the switch from largely permanent to mostly transitory movements in inflation is remarkably similar across the united states and these other countries. another apparent change in the inflation process has been a reduction in the correlation between inflation and unemployment ( atkeson and ohanian, 2001 ; roberts 2006 ). now, this relationship was always loose, as most of the historical variation in inflation has reflected influences aside from movements in unemployment or other measures of resource utilization. still, in the 1960s and 1970s, a reasonably strong empirical relationship between inflation and unemployment could be found for the united states, with inflation tending to

we will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer term inflation expectations remain well anchored at 2 percent. as always, in assessing the appropriate stance of monetary policy, we will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if we saw signs that the path of inflation or longer - term inflation expectations were moving materially and persistently beyond levels consistent with our goal. in addition, we are continuing to increase our holdings of treasury securities and agency mortgage backed securities at least at their current pace until substantial further progress has been made toward our maximum - employment and price - stability goals. these purchases have materially eased financial conditions and are providing substantial support to the economy. at our june meeting, the committee discussed the economy ’ s progress toward our goals since we adopted our asset purchase guidance last december. while reaching the standard of “ substantial further progress ” is still a ways off, participants expect that progress will continue. we will continue these discussions in coming meetings. as we have said, we will provide advance notice before announcing any decision to make changes to our purchases. we understand that our actions affect communities, families, and businesses across the country. everything we do is in service to our public mission. the resumption of our fed listens initiative will further strengthen our ongoing efforts to learn from a broad range of groups about how they are recovering from the economic hardships brought on by the pandemic. we at the federal reserve will do everything we can to support the recovery and foster progress toward our statutory goals of maximum employment and stable prices. thank you. i am happy to take your questions. 2 / 2 bis central bankers'speeches