short - term foreign currency debt of the central government, and on levels of international reserves, including financial derivative positions. for transparency standards to be most effective, they require as broad a participation by authorities as possible. further, they must balance the need for comprehensive and timely disclosure with the need for accurate data. improvements in financial data from the private sector, which i have discussed, are crucial, but public sector disclosure must not await improvements in private sector disclosure. the imf can contribute to public sector transparency with respect to critical economic variables through implementation of the special data dissemination standards, or sdds. voluntary compliance with sdds by all countries will provide some assurance that economic transactions are not being based on misleading or incomplete information. the need for capital mobility a third lesson suggested by the historical analysis is that the ability to attract foreign exchange is a critical element of a stable global financial system. in the modern context, i believe that this finding has two corollaries. first, we must avoid blocking capital flows, particularly of long - term funds. there have been policymakers who have advocated capital controls. i do not need to give a group of business economists a lesson in basic economics, but there are those outside of this room who need to be reminded of the benefits of free capital flows. even though current international financial troubles indicate that there are risks from the free flow of capital, the benefits are substantial and contribute importantly to rising standards of living. as you know, an individual country ’ s pool of savings does not always equal its pool of investment opportunities. if borders were closed to the flow of capital, interest rates would adjust to equilibrate domestic saving and investment, but some investment opportunities, which might be attractive by international standards, might go unfunded while less attractive domestic opportunities would be funded. with the free flow of capital, countries that have a greater pool of highly productive investment opportunities will benefit from the inflow of capital and those that export capital can put their savings to better, more rewarding use. this presumes the institutional underpinnings outlined above. protectionist impulses for measures that impede the flow of goods, services and managerial knowhow must also be avoided. while participation in such free exchange across borders creates industries and individuals that are made better off and some that do not fare so well, we know that, on balance, all societies are better off from allowing the free flows of international competition. given the fact that there are scarce resources globally, it is

prices for pce rose more than expected in september and october and so did " core " pce inflation, which excludes more volatile food and energy prices and is a better guide to future inflation. three - month annualized core pce inflation has risen over the past two months, while six - month annualized inflation has made only a small improvement. these rates now stand at 2. 8 percent and 2. 3 percent, respectively. these recent readings have contributed to 12 - month core pce inflation of 2. 8 percent in october. if we compare components of core inflation this october with last october, we see 12month housing services inflation has softened and goods inflation has moved to slight deflation, but there has been an increase in nonmarket core services excluding housing. overall, i feel like an mma fighter who keeps getting inflation in a choke hold, waiting for it to tap out yet it keeps slipping out of my grasp at the last minute. but let me assure you that submission is inevitable - inflation isn't getting out of the octagon. while the recent increase and the level of inflation raise concerns that it may be getting stuck above the fomc's 2 percent goal, let me emphasize that this is a risk but not a certainty. i take the recent inflation data seriously, but we saw a similar uptick in inflation a year ago that was followed by a continued decline, so i also don't want to overreact. and i expect housing services inflation to continue to moderate and i do not take much signal from the elevated inflation for other non - market services. now let me turn to the implications for monetary policy based on my assessment of the underlying economic outlook. while some near - term aspects of the outlook may be a little unclear, something that is clear is the direction for monetary policy and our policy rate over the medium term, which is down. this downward trajectory reflects the fact that the level of aggregate demand in the economy, relative to supply, has moderated significantly over the past year - it is plainly visible in the data on spending and the labor market. inflation over that time is also significantly lower, so it makes sense to be moving policy rates toward a more neutral setting. and there is a ways to go. in september, the median of the projections of fomc participants was that the federal funds rate would be 3. 4 percent at the end of next year, which is about 100 basis points lower than it is today.