jerome h powell : welcoming remarks speech by mr jerome h powell, member of the board of governors of the federal reserve system, at the economic growth and regulatory paperwork reduction act outreach meeting, dallas, texas, 4 february 2015. * * * on behalf of the federal reserve system, i am pleased to be here at the second in a series of outreach meetings designed to hear your comments and suggestions about reducing regulatory burden on insured depository institutions. thank you all for taking the time to participate in this important process, and i ’ d also like to extend my thanks to the federal reserve bank of dallas for hosting today ’ s meeting. the federal reserve takes seriously its obligations under the economic growth and regulatory paperwork reduction act ( egrpra ). the egrpra review provides our agencies with the opportunity to consider whether our regulations are necessary and current in keeping up with the financial services and regulatory environments. well - conceived regulations help to ensure the safety and soundness of our banking system as well as the fair treatment of consumers. but unnecessary, outdated, or unduly burdensome regulations can exhaust the resources of insured depository institutions and reduce the important services that those institutions provide to households and businesses. creating balanced regulations that are effective and thoughtfully calibrated to avoid undue burden requires input from stakeholders. in - person meetings, like the one we are holding today, help us gather information that is critical to our understanding of how regulations affect not only the banking industry but also the consumers and communities they serve. they also allow stakeholders to learn from one another and provide us with different perspectives on the complex issues that our regulations address. outside of these meetings, we also look forward to receiving written comments in which you can elaborate on how to improve our regulations in more detail than we can cover in the time we have today. we understand that the sizes of depository institutions vary, that they operate through different business models, and that they manage different risks. this is why one focus of the egrpra review is considering the potential burden imposed by our regulations on community banks and other small insured depository institutions, so that we may carefully consider whether our regulations are appropriately adjusted for smaller institutions. we think it ’ s important to tailor rules whenever possible to clearly distinguish requirements for different portfolios of depository institutions and reduce unnecessary burden on community banks. of course, tailoring regulations may be more challenging in some areas, such as rules that provide transparency and fairness in consumer transactions because those

term. although our objective is forward looking, there is a risk that continued undershooting of our inflation aim will cause households and firms to revise down their inflation expectations. and lower inflation expectations directly lower the equilibrium nominal interest rate, requiring a lower interest rate to create monetary stimulus. thanks to our measures, inflation expectations have remained anchored. according to the ecb ’ s latest survey of professional forecasters, expected inflation at a five - year horizon is 1. 8 %. but market - based expectations have been lower and more sensitive to current levels of inflation, and without our measures, the risk of a de - anchoring would have been very serious. the increased burden on monetary policy taken together, a long period of growth below potential requires robust policy action to prevent the low growth from becoming entrenched into the long run. but at the same time, falling potential growth also increases the burden on monetary policy to carry out that macroeconomic stabilisation. the policy mix in the euro area is already heavily tilted towards monetary policy given the decentralised nature of fiscal policy by 19 national governments and the limited success of european fiscal rules in creating incentives to build up national fiscal space. the available fiscal space in most euro area countries is in addition constrained by the overhang of public debt inherited from the crisis. lower potential growth and weaker inflation inhibit the reduction of public debt ratios by acting on both sides of the fraction. higher expenditure arising from higher structural unemployment and lower tax revenues from weaker inflation restrict the ability of governments to save, i. e. reduce the numerator. and low inflation increases the real savings required to serve a given level of nominal debt. similarly, weaker potential growth lessens the ability to increase the denominator and grow out of the overhang. since the crisis, the overhang of public debt has not just reduced the ability of fiscal policy to share the burden of macroeconomic stabilisation with monetary policy, but it has also impaired the transmission of monetary policy through the sovereign - bank nexus. recent research by the ecb shows that during the sovereign crisis, banks in stressed countries increased their holdings of domestic sovereigns. 4 this was particularly marked for publicly owned banks and recently bailed - out banks. as the price of stressed sovereign bonds fell, these banks were forced to deleverage, reducing their lending. this drop in lending was not just confined to the domestic market – foreign subsidiaries of banks with head offices in stressed countries also reduced lending. the notion