the committee has lowered the target range for the federal funds rate by 3 / 4 percentage point. these policy adjustments put the current target range at 1 - 1 / 2 to 1 3 / 4 percent. the committee took these actions to help keep the u. s. economy strong and inflation near our 2 percent objective and to provide some insurance against ongoing risks. as monetary policy operates with a lag, the full effects of these adjustments on economic growth, the job market, and inflation will be realized over time. we see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth, a strong labor market, and inflation near our symmetric 2 percent objective. we will be monitoring the effects of our policy actions, along with other information bearing on the outlook, as we assess the appropriate path of the target range for the federal funds rate. of course, if developments emerge that cause a material reassessment of our outlook, we would respond accordingly. policy is not on a preset course. the fomc is committed to ensuring that its policy framework remains well positioned to meet its statutory goals. we believe our existing framework has served us well. nonetheless, the current low interest rate environment may limit the ability of monetary policy to support the economy. we are currently conducting a public review of our monetary policy strategy, tools, and communications — the first of its kind for the fed. with the u. s. economy operating close to maximum employment and price stability, now is an especially opportune time to conduct such a review. through our fed listens events, we have been hearing a diverse range of perspectives not only from academic experts, but also from representatives of consumer, labor, business, community, and other groups. we will draw on these insights as we assess how best to achieve and maintain maximum employment and price stability. we will continue to report on our discussions in the minutes of our meetings and share our conclusions when we finish the review, likely around the middle of next year. in a downturn, it would also be important for fiscal policy to support the economy. however, as noted in the congressional budget office ’ s recent long - term budget outlook, the federal budget is on an unsustainable path, with high and rising debt : over time, this outlook could restrain fiscal policymakers ’ willingness or ability to support economic activity during a downturn. 1 in addition, i remain concerned

##iness of its portfolio. in an attempt to relate capital requirements to risk, the accord divided assets into four risk “ buckets ”, corresponding to minimum total capital requirements of zero percent, 1. 6 percent, 4. 0 percent, and 8. 0 percent, respectively. indeed, much of the complexity of the formal capital requirements arises from rules stipulating which risk positions fit into which of the four capital “ buckets ”. despite the attempt to make capital requirements at least somewhat risk - based, the main criticisms of the accord, at least as applied to the activities of our largest, most complex banking organizations, appear to be warranted. in particular, i would note three : first, the formal capital ratio requirements, because they do not flow from any particular insolvency probability standard, are, for the most part, arbitrary. all corporate loans, for example, are placed into a single 8 percent “ bucket ”. second, the requirements account for credit risk and market risk, but not explicitly for operating and other forms of risk that may also be important. third, except for trading account activities, the capital standards do not take account of hedging, diversification, and differences in risk management techniques, especially portfolio management. these deficiencies were understood even as the accord was being crafted. indeed, it was in response to these concerns that, for much of the 1990s, regulatory agencies have focused on improving supervisory oversight of capital adequacy on a bank - by - bank basis. in recent years, the focus of supervisory efforts in the united states has been on the internal risk measurement and management processes of banks. this emphasis on internal processes has been driven partly by the need to make supervisory policies more risk - focused in light of the increasing complexity of banking activities. in addition, this approach reinforces market incentives that have prompted banks themselves to invest heavily in recent years to improve their management information systems and internal systems for quantifying, pricing, and managing risk. while it is appropriate that supervisory procedures evolve to encompass the changes in industry practices, we must also be sure that improvements in both the form and content of the formal capital regulations keep pace. inappropriate regulatory capital standards, whether too low or too high in specific circumstances, can entail significant economic costs. this resource allocation effect of capital regulations is seen most clearly by comparing the basle standard with the internal “ economic capital ” allocation processes of some of our largest banking companies. for internal purposes, these large institutions attempt