second, consumers are in better financial shape. households are carrying less debt, with total household liabilities roughly $ 500 billion below their cyclical peak in 2008. moreover, lower interest rates have facilitated significant mortgage debt refinancing, which has lowered the household debt service burdens. depending on the particular measure used, household debt service burdens relative to income have fallen back to levels last seen in the 1980s and 1990s. in addition, household net worth has recovered sharply, boosted primarily by higher financial asset valuations, but also by some recovery in home prices. third, the fiscal restraint that has held back growth in recent years has ended, with the federal budget deficit now at a level consistent with a stable to slowly declining federal debtto - gdp ratio. in the aggregate, state and local governments have also ended their retrenchment. one important piece of evidence in this regard is the fact that state and local see, for example, the latest blue chip consensus survey ( volume 39, no. 11, november 10, 2014 ). the median real gdp forecast for 2015 ( fourth quarter over fourth quarter ) is 2. 9 percent. bis central bankers ’ speeches government employment is now rising at between 5, 000 and 10, 000 per month, after generally contracting during the 2009 to 2012 period. now that these headwinds have subsided, buoyant financial market conditions spurred, in part, by a very accommodative monetary policy should do more to support economic activity. in particular, compared to historical patterns, the current household net worth - to - income ratio is high relative to the personal saving rate. this suggests some scope for a decline in the household saving rate. if this were to occur, consumption growth would outstrip income growth. similarly, financial market conditions are conducive to sustained gains in business fixed investment. equity prices are high, borrowing costs are low, cash flows are strong and corporate balance sheets are healthy. another positive development for both the u. s. and the global economy is the sharp decline in energy prices. let ’ s start with the u. s. perspective. despite the impressive recent gains in natural gas and crude oil production, the u. s. still is a net importer of energy. as a result, falling energy prices are beneficial for our economy. in economist parlance, falling energy prices are a positive “ terms of trade ” shock for the u. s. over the near - term, this will lead to a

me turn to the issue of “ how much, ” in other words, what federal funds rate target over the long term is consistent with our employment and inflation objectives. this issue is more difficult to judge for a number of reasons. first, it depends on how financial conditions evolve in response to our monetary policy adjustments. second, it depends on other factors, such as potential real gdp growth, which in turn, depends on the growth of the labor force and productivity growth trends. my current thinking, in this regard, is that the equilibrium federal funds rate consistent with 2 percent inflation will be somewhat lower in the future than in the past. in part, this reflects the likelihood that potential real gdp growth will likely be somewhat lower going forward due to slower growth in the labor force. but my confidence in this conclusion may change on the basis of incoming empirical evidence. in fact, i suspect my views will evolve as i see how the economy responds over time to higher interest rates and tighter financial market conditions. bis central bankers ’ speeches conclusion in my remarks today, i have provided my current thinking about the u. s. growth and the inflation outlook, and the implications for monetary policy. to sum up, the u. s. economic outlook looks brighter, with growth likely to be somewhat above the trend of the past five years. the risks to growth appear generally balanced, without unusually high risks that growth will either be much stronger or weaker than my forecast. on inflation, i remain confident, despite the recent softening, that inflation will begin to move up towards our 2 percent objective next year. this move will not likely happen immediately, however, given the recent weakness in energy prices and the fact that non - energy import price trends are also likely to soften a bit over the near - term. with respect to monetary policy, i believe that market expectations as captured by the most recent new york fed ’ s surveys of primary dealers and market participants are reasonable – with lift - off expected to take place sometime around the middle of next year. but, life is uncertain and my judgment of the appropriate timing could change in response to incoming data and other factors that change the economic outlook. when we do begin to tighten monetary policy, the pace of tightening will depend not only on the outlook but also on how financial market conditions respond as we begin to remove monetary policy accommodation. financial market conditions are an important transmission mechanism of monetary policy. this is why i don ’ t favor indiscriminately adhering to