not see either of these scenarios in my forecast, so i do not anticipate that further accommodative monetary policy actions will need to be taken. bis central bankers ’ speeches an explicit numerical objective for inflation the past three years have proven to be challenging times for monetary policymakers. we entered unprecedented territory as we employed new policy tools to stem the financial crisis and limit the damage to the economy from the severe economic recession. there was no established framework for making policy decisions in such an environment, and that added to the difficulties in determining appropriate policy. it also created difficulties for the fed ’ s communications. in my view, a high priority for the fed must be to strengthen our monetary policy framework and articulate that framework to the public so that they will better understand the basis for our decisions and be better able to formulate expectations of future policy actions. an important first step in that direction is for the federal reserve to adopt an explicit numerical objective for inflation. the explicit inflation goal would help to anchor inflation expectations, raise policy transparency, and increase the central bank ’ s accountability for its actions. there is considerable evidence that countries that have adopted such an objective as a cornerstone of their monetary policy decision - making have had more success at achieving price stability without any deterioration in the stability of real activity. in the united states, congress has given the fed a mandate to promote the goals of maximum employment, stable prices, and moderate long - term interest rates. price stability is the most effective way for monetary policy to promote the other two goals. thus, by helping the fed achieve and maintain price stability, an explicit inflation objective would help the fed promote all three of the goals set forth by congress. for nearly 20 years, i have advocated that the fed make explicit its commitment to a numerical inflation objective in support of its full mandate. i believe that now is an opportune time to do so. first, it will increase the credibility of our commitment to keeping prices stable even as we employ new, less familiar policy tools. second, we are confronting an environment where some may be questioning the ability or resolve of the government to address our long - run fiscal problems. in such an atmosphere of uncertainty, being explicit about our inflation goal will underscore the fed ’ s commitment not to succumb to external pressures to use inflation as a solution to the country ’ s long - run deficit problem. this will help anchor inflation expectations, which is critical because an undesirable rise or fall

in inflationary expectations can generate a self - fulfilling mechanism. should inflation expectations become unhinged, it would be difficult and costly for the monetary authority to re - establish price stability. third, communicating an explicit inflation objective will clarify the fed ’ s intentions regarding the level of inflation it considers consistent with its mandate. some economists have suggested that raising our inflation goal above 2 percent would be an effective tool for lowering real interest rates. i am very wary of such a strategy because i don ’ t believe we can control inflation expectations that precisely. it is at least questionable whether we could credibly raise inflation expectations. and were we able to do so, how easily would we be able to bring them back down? trying to manipulate the public ’ s expectations may risk undermining the fed ’ s credibility and the public ’ s confidence in the institution. fourth, we eventually will need to normalize our monetary policy and exit this period of extraordinary accommodation. having an explicit inflation objective will help us maintain our commitment to price stability while we do that and increase the credibility of that commitment in the eyes of the public. as business leaders, you understand the importance of credibility in your own institutions. an institution's reputation is built on its credibility for fulfilling its commitments. once that foundation is compromised, it is very difficult to rebuild. the fed must do all it can to preserve its hard - earned credibility. i believe an explicit inflation goal can help us do that. bis central bankers ’ speeches conclusion in summary, the u. s. economic recovery will continue and gradually strengthen over time. i expect annual growth of less than 2 percent this year to gradually accelerate to around 3 percent next year. as the economy strengthens, prospects for labor markets will continue to improve and the unemployment rate will gradually decline. as we move forward in this time of change, the federal reserve remains committed to its long - run statutory goals of price stability and maximum employment. we remain vigilant on inflation and committed to clear communication of our monetary policy. i believe that this communication, and our accountability to the public, could be greatly enhanced were the fed to adopt an explicit numerical inflation goal. having such an objective in place would prove particularly useful in the current environment in which the fed is providing monetary stimulus using new tools that are not as familiar to the public and the markets. it will also help at a time when some may view the fiscal situation as threatening the independence of monetary policy. and it will help in the future