has the tools it needs to raise short - term interest rates when it becomes appropriate to do so and to maintain reasonable control of the level of short - term interest rates as policy continues to firm thereafter, even though the level of reserves held by depository institutions is likely to diminish only gradually. the primary means of raising the federal funds rate will be to increase the rate of interest paid on excess reserves. the committee also will use an overnight reverse repurchase agreement facility and other supplementary tools as needed to help control the federal funds rate. as economic and financial conditions evolve, the committee will phase out these supplementary tools when they are no longer needed. the committee intends to reduce its securities holdings in a gradual and predictable manner primarily by ceasing to reinvest repayments of principal from securities held by the federal reserve. it is the committee ’ s intention to hold, in the longer run, no more securities than necessary for the efficient and effective implementation of monetary policy, and that these securities be primarily treasury securities. summary in sum, since the july 2014 monetary policy report, there has been important progress toward the fomc ’ s objective of maximum employment. however, despite this improvement, too many americans remain unemployed or underemployed, wage growth is still sluggish, and inflation remains well below our longer - run objective. as always, the federal reserve remains committed to employing its tools to best promote the attainment of its objectives of maximum employment and price stability. thank you. i would be pleased to take your questions. bis central bankers ’ speeches

4 percent at present. 5 rising education levels do point to a decline in the natural rate since the 1960s, because more highly educated people are less likely to be unemployed. the share of the population with a college degree has risen from less than 15 percent in the late 1960s to nearly 40 percent now, and the share with less than a high school degree has declined the natural rate of unemployment is the unemployment rate over the longer term that is consistent with low and stable inflation. it comprises both the “ frictional ” unemployment of people who are temporarily between jobs or searching as they have reentered the labor force and the more “ structural ” unemployment of people whose skills or physical location are not a good match for the jobs available. for more discussion, see janet l. yellen ( 2017 ), “ the goals of monetary policy and how we pursue them, ” speech delivered at the commonwealth club, san francisco, january 18, https : / / www. federalreserve. gov / newsevents / speech / yellen20170118a. htm. contemporaneous estimates of the natural rate ( or “ full employment ” ) from the late 1960s were lower than current estimates for that period. for example, the economic report of the president from 1968 defined potential output as occurring when the unemployment rate is 4 percent. see executive office of the president of the united states ( 1968 ), economic report of the president ( washington : u. s. government printing office, february ), p. 61, http : / / www. presidency. ucsb. edu / economic _ reports / 1968. pdf. - 4from 45 percent to about 5 percent. 6 another important difference from the 1960s is that inflation has been low and stable for an extended period, which has better anchored inflation expectations. today policymakers have a greater appreciation of the role expectations play in inflation dynamics and a clearer commitment to maintaining low and stable inflation. unfortunately, with the passage of a half - century and important changes in the structure of our economy and in central bank practices, in my view the historical comparison does not shed as much light as we might have hoped. questions prompted by a tight labor market the lack of useful historical precedent leaves us with some uncertainty about the answers to several important and challenging questions. first, estimates of the natural rate of unemployment by federal open market committee ( fomc ) participants and others have drifted lower as unemployment has declined without much apparent reaction from inflation. how reliable