. we also conduct a biannual poll of small businesses to understand their credit needs and availability. based on the poll results, we have developed an ongoing series of clinics for small businesses to help them take the next step to access capital and identify new sources of funding. we also get important input from our small business and agricultural advisory council, whose members help us understand key economic and financial issues affecting regional businesses and communities. this year we tapped two new jersey business leaders to join the advisory council : adenah bayoh, co - founder of kapwood, llc, and ranjini poddar, founder of artech information systems, llc. let me now review recent developments in the national and regional economy, and at the end of my talk, i will be happy to answer questions you may have about the economic outlook. as always, what i have to say reflects my own views and not necessarily those of the federal reserve system or the federal open market committee ( fomc ). 1 national economic conditions after growing at just a 2 percent annual rate from 2010 through 2012, real gdp expanded more quickly in 2013 and 2014, rising at a 2. 7 percent annual rate. this was sufficient to push the unemployment rate down by more than two percentage points over this period. this bis central bankers ’ speeches firming in growth reflected several important developments that, in my view, are likely to continue through 2015. the data we follow suggest that the household deleveraging process has largely run its course and the imbalances in the housing market have been mostly worked off. federal fiscal consolidation appears to be over for now, and employment and spending are increasing at the state and local government level. that said, economic performance in this cycle has been disappointing compared to historical patterns. even though household wealth relative to disposable income is nearly at its prefinancial crisis level and conditions in labor markets are substantially improved, consumer spending growth has been slower and the personal saving rate higher than what we would have expected based on past historical relationships. similarly, even with low mortgage rates, single - family housing construction has been surprisingly sluggish. and, despite very accommodative financial conditions and record corporate profits, growth of business fixed investment has been tepid. looking forward, my outlook for 2015 is that economic growth will be close to the pace of the past two years, supported by continued solid fundamentals and accommodative financial conditions. if i am correct, then this

remove policy accommodation that we have the requisite tools to effectively support this decision. we have tested numerous tools including overnight reverse repurchase operations, term reverse repurchase operations, and term deposit facilities to ensure that, when the time comes, lift - off can be managed smoothly. the primary tool will be interest on excess reserves ( ioer ), with overnight reverse repurchases as a supplemental tool to be used as needed to ensure a firm floor under short - term interest rates. for financial markets, the likely path of short - term rates after lift - off is just as important as the timing of lift - off. here, i anticipate that the path will be relatively shallow. headwinds in the aftermath of the financial crisis are still in evidence, particularly the diminished availability and tougher terms for residential mortgage credit. how fast the normalization process will proceed depends mainly on two factors : how the economy evolves and how financial market conditions respond to movements in the federal funds rate. if financial market conditions do not tighten much in response to higher short - term interest rates, we might have to move more quickly. after all, the point of raising short - term interest rates is to exert some restraint on financial market conditions. in contrast, if financial conditions tighten unduly, then this will likely cause us to go much more slowly or even to pause for a while. at the end of the day, we will move short - term interest rates to generate the set of financial market conditions that we deem is most consistent with our employment and inflation objectives. how high will short - term rates ultimately need to go? i think this issue is very difficult to judge for a number of reasons. first, it depends on how financial market conditions evolve in response to our monetary policy adjustments. second, it depends on other factors, such as real potential gdp growth, which, in turn, depends on the growth rates of the labor force and of productivity. my current thinking is that the long - run nominal federal funds rate consistent with 2 percent inflation is somewhat lower than in the past. my point estimate is 3½ percent, but i wouldn ’ t bet the farm on this. i have considerable uncertainty about this estimate. regional economic conditions now let ’ s turn to the new jersey economy. one feature of the state ’ s economy is its industrial diversity. a sizeable number of jobs in the state are in the healthcare, professional and business services, wholesale and retail trade,