advanced foreign economies ’ central banks. for example, our share is larger than that of the bank of canada, but it is about the same as the bank of england ’ s, and much smaller than the shares of the european central bank and the bank of japan. one must remember that there is no economic theory that tells us what the optimal size of a central bank balance sheet should be. so, just because our balance sheet is “ large ” does not mean there is anything wrong with it. however, arguments can be made that we should reduce the size of our balance sheet. first, we expanded it for emergency reasons due to the pandemic. 3 / 5 bis central bankers'speeches as the emergency passes, we can undo those actions and get the balance sheet down to something close to its pre - pandemic trend. second, by doing so, we free up balance sheet space in the event we need to expand it in the future to deal with economic shocks. third, the private sector appears to be inundated with liquidity, as evidenced by the large take - up at our overnight reverse repurchase agreement facility. draining some of this liquidity would help maintain smooth market functioning. going forward, the committee will need to decide what type of reinvestment policy to have in place. currently, when securities on the fed ’ s balance sheet mature, the proceeds are reinvested in new securities, keeping the balance sheet growing in line with net purchases. under this policy, when net asset purchases cease, reinvestment will keep the balance sheet constant at the size at that time. based on past experience, an effective way to gradually reduce the balance sheet to a more efficient level is to change that reinvestment policy to limit, or cease, reinvestment. allowing this “ runoff ” was the main way the fomc shrank the balance sheet before the pandemic. i expect the reinvestment strategy will be heavily influenced by the fed ’ s experience with this policy between 2017 and 2019. during that time, the fomc recognized that the monthly maturity of securities was lumpy ; some months there were many securities maturing, and others few. the fomc ensured a gradual and predictable roll - off of securities that allowed market participants to plan for the fed ’ s gradual retreat from the treasury and mbs markets, which was done by instituting monthly redemption caps that gradually increased over time. i would support a similar process when the time

frequency readings, has moved down since april, although it came in at 2. 6 percent in july, again remaining well above our 2 percent goal. in addition, the latest consumer and producer price index reports suggest that 12 - month core pce inflation in august was likely a touch above the july reading. the persistently high core inflation largely reflects pressures on housing prices, perhaps due in part to low inventories of affordable 1 / 5 bis - central bankers'speeches housing. the progress in lowering inflation since april is a welcome development, but core inflation is still uncomfortably above the committee's 2 percent goal. prices remain much higher than before the pandemic, which continues to weigh on consumer sentiment. higher prices have an outsized effect on lower - and moderateincome households, as these households devote a significantly larger share of income to food, energy, and housing. prices for these spending categories have far outpaced overall inflation over the past few years. economic growth moderated earlier this year after coming in stronger last year. private domestic final purchases ( pdfp ) growth has been solid and slowed much less than gross domestic product ( gdp ), as the slowdown in gdp growth was partly driven by volatile categories including net exports, suggesting that underlying economic growth was stronger than gdp indicated. pdfp has continued to increase at a solid pace so far in the third quarter, despite some further weakening in housing activity, as retail sales have shown further robust gains in july and august. although personal consumption has remained resilient, consumers appear to be pulling back on discretionary items and expenses, as evidenced in part by a decline in restaurant spending since late last year. low - and moderate - income consumers no longer have extra savings to support this type of spending, and we have seen loan delinquency rates normalize from historically low levels during the pandemic. the most recent labor market report shows that payroll employment gains have slowed appreciably to a pace moderately above 100, 000 per month over the three months ending in august. the unemployment rate edged down to 4. 2 percent in august from 4. 3 percent in july. while unemployment is notably higher than a year ago, it is still at a historically low level and below my and the congressional budget office's estimates of full employment. the labor market has loosened from the extremely tight conditions of the past few years. the ratio of job vacancies to unemployed workers has declined further to a touch below the historically elevated