their operations. second, even innovations that do not spur an entirely new way of doing business can encourage equipment spending because some firms will choose to retire obsolete equipment more rapidly than they otherwise would. accordingly, if the pace of progress slows, increases in business investment, particularly of high - tech goods, may also slow. of course, we cannot directly measure the pace of technological progress, but we can look at some indicators to help us judge. one indicator that economists often look at is prices, particularly “ qualityadjusted prices ” compiled by the bureau of labor statistics and used by the bureau of economic analysis to deflate nominal computer expenditures. over time, these quality - adjusted prices tend to fall, as computers and related equipment become more and more powerful. between 1992 and 2002, the quality - adjusted price of new computers fell at an annual rate of 18 percent. the speed at which these prices fall reflects mainly the pace of technological progress. unfortunately, over the past several quarters, the rate of price decline slowed from that experienced during the preceding decade : computer equipment prices fell just 9 percent at an annual rate in 2003 and the first half of 2004. although we cannot be certain, at least some of this deceleration may represent some slowing in the rapid pace of technological improvement. indeed, detailed data that we use in putting together the industrial production data suggest that the number of new pc models introduced this year has fallen markedly from the pace posted in the preceding few years, suggesting that the pace of innovation, at least in this one market, has slowed. a third factor for economists considering the outlook for the business sector is the question of whether the existing stock of business equipment is too high. as the high - tech boom of the nineties was ending, many observers claimed that companies had been overly optimistic and had purchased too many pcs and peripherals and laid too much fiber optic cable, resulting in an actual capital stock that exceeded the desired level for business. when such a “ capital overhang ” emerges, new investment spending tends to be curtailed for a while. indeed, in 2001 and 2002, real outlays for equipment and software fell at an annual rate of nearly 6 percent. determining whether a capital overhang exists is difficult, and estimates of the size of overhangs are subject to considerable error. first, capital stocks are hard to measure ; although we know the amount of new capital goods purchased, we can only roughly estimate the rate of economic depreciation and obsolescence

it down last year. in particular, the reopening has been characterized by significant sectoral shifts in both aggregate demand and supply, and these shifts are causing widespread bottlenecks and triggering substantial changes in the relative price and wage structure of the economy. a similar reopening dynamic is playing out in other advanced economies, such as canada and the united kingdom. as these relative price adjustments work their way through the economy, measured inflation rises. but i continue to believe that the underlying rate inflation in the u. s. economy is hovering close to our 2 percent longer - run objective and, thus, that the unwelcome surge in inflation this year, once these relative price adjustments are complete and bottlenecks have unclogged, will in the end prove to be largely transitory. and this is a forecast that is shared by the vast majority of economists in the private sector, such as those surveyed by bloomberg and blue chip. that said, i believe, as do most of my colleagues, that the risks to inflation are to the upside, and i continue to be attuned and attentive to underlying inflation trends, in particular measures of inflation expectations, including the board staff ’ s index of common inflation expectations. 3 as chair powell has indicated, if we did see indicators of inflation expectations moving up and running persistently above levels consistent with our price stability mandate, monetary policy would react to that. but that is not the case at present. the september decision and the forward guidance in our fomc statement 1 / 3 bis central bankers'speeches let me now say a few words about the decisions reached at our september fomc meeting. since our december 2020 meeting, the committee has indicated that it will continue to maintain the pace of treasury and mortgage - backed securities purchases at $ 80 billion and $ 40 billion per month, respectively, until “ substantial further progress ” has been made toward our maximumemployment and price - stability goals. 4 at our september meeting, the committee continued to discuss the progress made toward these goals, and i myself believe that the “ substantial further progress ” standard has more than been met with regard to our price - stability mandate and has all but been met with regard to our employment mandate. if progress continues broadly as expected, the committee in september judged that a moderation in the pace of asset purchases may soon be warranted. at our meeting, we also discussed the appropriate pace of tapering asset purchases once economic conditions satisfy the