sustained and passed along into final prices, the fed ’ s price stability objective might no longer be a compelling policy rationale. in such a case – even with the unemployment rate still high – the fomc would have cause to consider the path of policy. this is truer still if inflation expectations increase materially. and if the fed ’ s holdings work predominantly through the so - called portfolio balance channel, the cessation of purchases should not reverse any benefits attained. the fed ’ s increased presence in the market for long - term treasury securities also poses nontrivial risks. the treasury market is special. it plays a unique role in the global financial system. it is a corollary to the dollar ’ s role as the world ’ s reserve currency. the prices assigned to treasury securities – the risk - free rate – are the foundation from which the price of virtually every asset in the world is calculated. as the fed ’ s balance sheet expands, it becomes more of a price maker than a price taker in the treasury market. and if market participants come to doubt these prices – or their reliance on these prices proves fleeting – risk premiums across asset classes and geographies could move unexpectedly. the shock that hit the financial markets in 2008 upon the imminent failures of fannie mae and freddie mac gives some indication of the harm that can be done when assets perceived to be relatively riskless turn out not to be. in the united states, the fed ’ s expanded participation in the long - term treasury market also runs the more subtle risk of obfuscating price signals about total u. s. indebtedness. longterm economic growth necessitates putting the u. s. fiscal trajectory on a sounder footing. the fiscal authorities need as clear an early warning system as possible, not a handy excuse to delay. and overseas – as a consequence of more - expansive u. s. monetary policy and distortions in the international monetary system – we see an increasing tendency by policymakers to intervene in currency markets, administer unilateral measures, institute ad hoc capital controls, and resort to protectionist policies. extraordinary measures tend to beget extraordinary countermeasures. second - order effects can have first - order consequences. heightened tensions in currency and capital markets could result in a more protracted and difficult global recovery. these, too, are developments that the fomc must monitor carefully. responsible monetary policy in the current environment requires attention not only to near

no impact compared to last year ’ s proposal. for firms that have stress test results indicating an scb at or slightly above 2. 5 percent, this change would represent a modest increase in the stringency of the scb. raising the floor may help to reduce pro - cyclicality by limiting the reduction in scb capital buffers when stress test losses decrease during good times. raising the floor also would help moderate any increase in those buffers at the onset of economic downturn conditions as losses begin to increase. this approach would have three significant benefits as compared to the ccyb option : greater simplicity, transparency, and predictability. raising the fixed floor would be simpler to execute than the ccyb proposal because raising the floor once and for all times would not require the board to make complex, real - time decisions about how to adapt the regulatory framework to the evolving vulnerabilities to the economy. raising the fixed floor also would be more transparent and predictable for the public and the industry because a firm ’ s capital requirement would vary less over time. there are drawbacks to the higher fixed floor option, of course. for firms whose losses are typically close to the existing 2. 5 percent floor, this change will affect them more than others and produce a capital regime with slightly less risk sensitivity. i also recognize, in terms of targeting pro - cyclicality, this approach would be much less direct than more actively managing the level of the ccyb. conclusion in closing, let me say that it is my hope to have an scb framework in place for the 2020 stress tests. of course, we will solicit public comment on potential revisions to the scb proposal through the standard rulemaking process, and i expect that to occur in the near future. i further expect that we will maintain the basic framework of the scb while also incorporating some additional refinements, such as to address volatility and provide better notice for firms in planning their capital actions. as i have stated, our goals remain to simplify our capital framework while maintaining the overall amount of capital in the u. s. banking system. the refinements we are considering to the scb framework would also improve the efficiency, coherence, and transparency of the regulatory capital framework and the core principles of our stress testing program that have proven successful. i look forward to continued feedback on ccar as we work through the improvements that i described, with a goal of ensuring that we maintain the same