speeches being more explicit about appropriate policy can clear up a lot of uncertainty. for example, suppose inflation were running higher than we would like, and the economic projections in the sep showed it coming down over the next couple of years. in the absence of information on participants ’ policy projections, the public would not know whether the fomc thought inflation would simply come down on its own or whether it thought that a monetary tightening would be required to reduce inflationary pressures. including policy projections will help clarify such judgments. in my opinion, this is a substantial, first - order improvement in policy communications, and this greater clarity may have significant additional value for improving how the economy operates. expectations of the future path for policy and the degree of uncertainty surrounding those expectations are key determinants of private borrowing rates and other asset prices. these play an important role in the spending and saving decisions of households and businesses. households and businesses will be able to make better - informed decisions if they have a clearer notion of future policy rates ; the potential for reduced uncertainty could also lower the risk premium embedded in longer - term interest rates. the second new communications initiative – a more explicit consensus framework for monetary policy – is still a work - in - progress. thus i can only talk about it in generalities and give you my personal views about what it should say and why it would be very helpful. in my view, a framework statement should help clarify what the dual mandate goals of maximum employment and price stability mean in terms of measurable economic outcomes. it should also convey the extent to which monetary policy can be expected to deliver particular long - run outcomes. and it should better enable the public to form expectations about how policy will react to economic disturbances that move employment and inflation away from levels consistent with the dual mandate. as i noted earlier, our goals of maximum employment and price stability usually are not in conflict ; but when they are, a more explicit framework can provide a better idea of how the committee will weigh the relevant costs and benefits that enter this more difficult decision - making process. i have strongly supported the publication of our policy projections, and i strongly support the adoption of a more explicit consensus framework statement. in my opinion, my current policy views and prescriptions continue to be appropriate in light of these new communications vehicles. the threshold policy i discussed earlier advocates keeping the federal funds rate near zero until either the unemployment rate falls below 7 percent ( at least ) or until medium - term inflation breaches 3 percent. the f

charles l evans : thoughts on accommodative monetary policy, inflation and financial instability speech by mr charles l evans, president of the federal reserve bank of chicago, at the credit suisse asian investment conference, hong kong, 28 march 2014. * * * introduction thank you, mr. naqvi. it is truly a pleasure to be here today at the credit suisse asian investment conference, and i thank the organizers for including me in this impressive program. today, i would like to make three points concerning the u. s. economy and accommodative monetary policy. first, the u. s. economy continues to improve, and accommodative monetary policy will remain a strong support for this recovery for quite some time. second, although highly accommodative monetary policy can lead to increasing inflation risks today, inflation in the united states is too low. and this is true throughout much of the world. third, while low interest rates could lead to financial exuberance in principle, monetary policy is not the best tool to mitigate this risk. instead, macroprudential policies are more appropriate tools to address the risk of financial instability. before turning to the details of these three points, i need to note that, as always, the standard fed disclaimer applies : i will be giving my personal perspective, and that is not necessarily shared by my colleagues on the federal open market committee ( fomc ) or in the federal reserve system. recent monetary policy actions as you all know, in response to the unusual economic circumstances generated by the financial crisis and the great recession, the fomc lowered our traditional policy tool – the target federal funds rate – to near - zero levels in december 2008 and has kept it there since. with the fed funds rate constrained at this lower bound, and economic conditions requiring additional policy accommodation, the committee also deployed nontraditional policy tools to stimulate activity. we embarked upon large - scale purchases of long - term treasury securities and agency mortgage - backed securities. we also used new communications tools to provide forward guidance about how long short - term interest rates will essentially remain at their lower bound of zero. while large - scale asset purchases and forward guidance are unconventional tools, their effect on interest rates and real economic activity is quite conventional. both tools are aimed at stimulating economic activity through lower long - term interest rates. through arbitrage and portfolio rebalancing, lower rates in one market are transmitted to other interest