also discuss the labor market and the rise in inflation. then, i ’ ll describe how the federal reserve ’ s monetary policy is working to help restore balance and stability to the economy during these uncertain times. economic outlook since it ’ s the friday before a holiday weekend, i won ’ t test any of you on the functions of the federal reserve system. but i do want to take a moment to discuss the fed ’ s dual mandate of promoting maximum employment and price stability. u. s. monetary policy is set by the fomc, which is made up of the board of governors and five of the 12 presidents of the federal reserve banks. we make our decisions after studying the data — lots of data. we look at everything from food and gas prices to retail sales and inventories, from labor costs and employment figures to semiconductor inventories and shipping expenses, and from the demand for goods and services to readings on public health. and we consider more than just numbers on spreadsheets and charts. we also regularly hear 1 / 4 bis central bankers'speeches from business and community leaders who tell us firsthand what is happening in the economy. this occurs both through regular meetings with our boards of directors and advisory groups, as well as in ongoing discussions with local leaders. that is why it ’ s so important for me to make trips like this one — even virtually — so i can meet with leaders to hear their perspectives. for example, earlier today i spoke with officials at the port newark – elizabeth marine terminal about supply chains and logistics. and yesterday, i met with groups in north jersey who are working to bridge the gap in health outcomes and housing — two critically important issues that can affect economic mobility. despite the disruptions from covid - 19, the overall economy has shown remarkable strength and resilience over the past year. to put this in perspective, the onset of the pandemic in 2020 caused the sharpest u. s. economic contraction since world war ii. since then, we have seen a remarkable turnaround. the economy, measured by real gross domestic product, or gdp, grew about 5 - 1 / 2 percent over the course of last year, the fastest pace of growth since 1984. to get an idea how long ago that was, 1984 was the year i finished college. the labor market has also improved dramatically and is now very strong. over the past 12 months through january, the economy added over 6 - 1 / 2 million jobs. the unemployment rate has

latin american economies have shown lower rates of growth on average ( less than a half ) combined with higher gdp volatility as compared to asia. this trait has been particularly marked in the case of argentina. as an example, in the last 25 years, the country showed a standard deviation of gdp growth about three times higher than emerging asia. at the same time gdp annual growth rate was about fifteen times lower. just to stress this point : if we take either growth or consumption, their distribution over time looks much more like a random walk and, thus, difficult to predict. these contexts of high volatility are associated with high uncertainty which constraints the effectiveness of monetary policy. these phenomena have severely harmed long - term performance, and were not cost - free in terms of welfare : excessive volatility in latin america is probably the main reason behind its economic underperformance vis - a - vis asian countries in the last three decades. in order to deepen our analysis of the subject we must evaluate the dominance factor because it poses complex problems to the conduct of our task. moreover, in certain circumstances, it can be perceived as a source of stand - alone uncertainty on macroeconomic dynamics. on the fiscal side, not long ago in my country we used to have not only the central bank but the financial system financing the treasury with no limits whatsoever. this is a key reform made during my tenure, which is bearing fruit under this time of turbulence. similarly, doubts as to the financial system ’ s solvency or external sustainability can also limit monetary policy room for manoeuvre. failure to consider this in the design of policies could eventually lead to severe disruption in macroeconomic performance, thus enhancing uncertainty. a prominent case of “ financial ” dominance in emerging economies has been dollarization or euroization of the system as we are seeing in central europe today. indeed, this feature can affect the full utilization of monetary policy ( and the choice of the exchange rate regime ) due to weaknesses in balance sheets of lenders and borrowers. in this case, dominance becomes clear in the face of the negative impact that exchange rate depreciation has on the net worth of financial systems. in contexts of financial frictions, and currency substitution, constraints for monetary policy are non - trivial. the monetary authority could therefore show some preference for avoiding fluctuations in the currency rate if the latter could seemingly originate “ balance - sheet ” effects that might end up affecting the solvency of the financial system. in fact, the