i anticipate that we will continue to see moderate growth of around 3 percent for 2012 and 2013, which is slightly above trend. business spending, especially investments in equipment and software, was relatively healthy last year, buoyed by solid growth in corporate earnings. in january, the philadelphia fed ’ s business outlook survey showed that regional manufacturing activity continued to expand at a moderate pace, the fourth consecutive monthly increase since a late summer lull. the survey ’ s measures of future activity also indicated that our respondents expect activity to continue to pick up over the next six months. i take this as a sign that business sentiment is also improving. on the housing front, i expect to see stabilization but not much improvement in 2012. we entered the great recession over - invested in residential real estate, and we are not likely to see a housing recovery until the surplus inventory of foreclosed and distressed properties bis central bankers ’ speeches declines. even as the economy rebalances, we should not seek nor should we expect housing and related sectors to return to those pre - recession highs. those exuberant days were simply not sustainable, and it would be a mistake to retain that standard as our benchmark for recovery. the housing crash destroyed a great deal of wealth for the average consumer and the economy as a whole. the losses are real and the consequences severe for many individuals and many businesses. moreover, the losses cannot be papered over with monetary policy nor should it try to do so. households and businesses, however, continue to make progress on restoring the health of their balance sheets by paying down debt and increasing savings. most economists, including myself, believe that this process will continue into 2012. but the drag on growth from this rebalancing will gradually lessen over time. while there is a long way to go in restoring a vibrant labor market, i am encouraged by the employment reports released over the past several months. the december employment report showed a net gain of 200, 000 jobs and a decline in the unemployment rate to 8. 5 percent. the economy added over 1. 6 million jobs during 2011, and the unemployment rate fell nearly a full percentage point. interestingly, the last time the unemployment rate fell by this much in one year was in 1995. as growth continues and strengthens, i expect further gradual declines in the unemployment rate, with the rate falling to around 8 percent or a little less, by the end of 2012. of course, forecasting is a hazardous business,

, and moderate long - term interest rates and does not favor one over the other. the consensus statement does not provide answers for all the hard policy choices. how best to implement this balanced approach takes a lot of judgment and may well differ across policymakers who may have different models of the economy even as they work to promote the same long - term goals for monetary policy. conclusion in summary, the u. s. economy is continuing to grow at a moderate pace. i expect annual growth to gradually accelerate to around 3 percent in 2012 and 2013. prospects for labor markets will continue to improve, with job growth strengthening and the unemployment rate falling gradually over time. i believe inflation expectations will be relatively stable and inflation will moderate in the near term. however, with the very accommodative stance of monetary policy, the inflation situation is one that bears careful watching in order to ensure that inflation pressures remain contained over the medium run. on monetary policy, the federal reserve has taken bold and significant steps to improve the transparency of its policy actions and to create better public understanding of the rationale behind the fomc ’ s decisions. specifically, the fomc now includes information about each participant ’ s assessments for the target federal funds rate path in its summary of economic projections. the fomc has also clarified its longer - run goals and monetary policy decisionmaking process and clearly articulated its inflation objective. economic research over the past 30 years has shown that setting monetary policy in a systematic manner leads to better economic outcomes – lower and less volatile inflation and greater economic stability in general. but the benefit depends on the public ’ s understanding of the policymaking framework. transparency not only furthers the effectiveness of monetary bis central bankers ’ speeches policy by enhancing the credibility of the central bank but also raises the fed ’ s accountability to the public. thus, i remain committed to working to increase the clarity of the fed ’ s public communications about current economic conditions, the economic outlook, and our policymaking framework. bis central bankers ’ speeches