portugal : banco de portugal, march ) ; another example of model - based analysis is a study of countercyclical capital buffers in the context of calibrated general - equilibrium macro models by ian christensen, cesaire meh, and kevin moran ( 2011 ), “ bank leverage regulation and macroeconomic dynamics ” ( pdf ), paper presented at the regulation of systemic risk conference sponsored by the board of governors of the federal reserve system and the journal of money, credit and banking, washington, september 15 – 16. bis central bankers ’ speeches current challenges let me finish with a few words about current challenges to financial stability. in particular, concerns about european fiscal and banking issues have contributed to strains in global financial markets that pose significant downside risks to the u. s. economic outlook. u. s. banking institutions have manageable levels of direct exposure to the peripheral european countries but more substantial links to financial institutions in the larger european economies. in addition, some major european banks that obtain appreciable short - term wholesale u. s. dollar funding from u. s. money market funds appear to be facing significant funding pressures. in light of such international linkages, further intensification of financial disruptions in europe could lead to a deterioration of financial conditions in the united states. the european rescue package announced in late october indicates a strong commitment by european leaders to address the issues stemming from sovereign debt. the package was a step in the right direction, but many details of the plan were unclear, and the measures would require rigorous implementation. the continued rise in sovereign debt spreads for some countries, more generalized market volatility, and political turmoil that we have seen in recent days speak to the need for forceful action to stabilize the situation. we, along with other supervisors, are actively engaged in ensuring that u. s. financial institutions are appropriately managing their credit and liquidity risks. to limit the spread of funding stresses, we have in place dollar liquidity swap lines with a number of foreign central banks. we are monitoring european developments very closely, and we will continue to do all that we can to mitigate the consequence of any adverse developments abroad on the u. s. financial system. conclusion the federal reserve and other u. s. financial regulators have accomplished a great deal since the dodd - frank act was enacted a little more than a year ago. we have put into practice an institutional framework for undertaking a macroprudential approach to supervision and regulation, and we have

to be restrictive for some time to have confidence that inflation is moving back to target. for these reasons, we are committed to avoiding pulling back prematurely. we also recognize that risks may become more two sided at some point. uncertainty is currently high, and there are a range of estimates around the appropriate destination of the target range for the cycle. proceeding deliberately and in a data - dependent manner will enable us to learn how economic activity and inflation are adjusting to the cumulative tightening and to update our assessments of the level of the policy rate that will need to be maintained for some time to bring inflation back to 2 percent. 1 i want to thank kurt lewis and shaghil ahmed of the federal reserve board for their assistance on these remarks. these views are my own and do not necessarily reflect those of the federal reserve board or the federal open market committee. 2 the central banks of the united states, the united kingdom, canada, the euro area, australia, new zealand, norway, sweden, and switzerland together account for 49 percent of nominal global gdp measured in dollars at market exchange rates. each of these central banks has raised its policy rate by at least 125 basis points in the past six months. 3 see lael brainard ( 2015 ), " unconventional monetary policy and cross - border spillovers, " speech delivered at " unconventional monetary and exchange rate policies, " 16th international monetary fund jacques polak research conference, washington, november 6 ; and lael brainard ( 2017 ), " cross - border spillovers of balance sheet normalization, " speech delivered at the national bureau of economic research's monetary economics summer institute, cambridge, mass., july 13. 4 a paper based on data between 2005 and 2017 found that about half of the reaction in german domestic yields spills over to u. s. yields following ecb announcements, which was nearly identical to the spillover from u. s. yields to german bund yields measured following federal open market committee announcements. see stephanie e. curcuru, michiel de pooter, and george eckerd ( 2018 ), " measuring monetary policy spillovers between u. s. and german bond yields, " international finance discussion papers 1226 ( washington : board of governors of the federal reserve system, april ). 5 the federal reserve's broad trade - weighted dollar index is based on 26 currencies of major u. s. trading partners. it is published in statistical release h. 10, " foreign exchange rates