janet l yellen : challenges confronting monetary policy speech by ms janet l yellen, vice chair of the board of governors of the federal reserve system, at the 2013 national association for business economics policy conference, washington dc, 4 march 2013. * * * thank you. i ’ m delighted to address the national association for business economics ( nabe ), a group that has done so much to promote understanding of the economy and the appropriate role of policy. my topic today is the challenges confronting monetary policy in what has been an unusually weak recovery from a severe recession. i will discuss the federal reserve ’ s ongoing efforts in these circumstances to speed the u. s. economy ’ s return to maximum employment in a context of price stability. 1 as you know, the federal open market committee ( fomc ) has recently taken new steps to achieve this objective. in september, the committee approved a new program of agencyguaranteed mortgage - backed securities ( mbs ) purchases, pledging to continue the program – contingent on favorable ongoing evaluations of its efficacy and costs – until there has been a substantial improvement in the outlook for the labor market. 2 most recently, in december the committee announced that it would purchase longer - term treasury securities after completion of the maturity extension program. at the same time, it revamped its forward guidance for the federal funds rate, explicitly linking the path of that rate to quantitative measures of economic performance. 3 my goal today is to explain these policies and why i consider them appropriate under current conditions. with respect to the asset purchase program, i will discuss several economic indicators that i plan to consider in evaluating the outlook for the labor market and then offer my perspective at present on the program ’ s efficacy and costs, an assessment i will continue updating in light of experience. the outlook for the labor market and inflation the committee ’ s recent actions are shaped by the fact that the labor market is still far from healed from the trauma of the great recession. despite some welcome improvement, employment remains well below its pre - recession peak, reflecting an economy that is still operating far short of its potential. at 7. 9 percent in january, the unemployment rate has declined from its recent peak of 10 percent in october 2009. but that ’ s still higher than unemployment ever reached in the 24 years prior to the recent recession and well above the 5. 2 to 6 percent that is the central tendency of fomc participants ’ estimates of the longerrun normal rate of unemployment.

##ical provisions built up bis central bankers ’ speeches under pcr freely and there were certain design issues too,. the buffer ( surplus of provisions over specific provisions ) will be allowed to be used by banks for making specific provisions for npas during periods of system wide downturn, with the prior approval of rbi. 20. the financial crisis also led to heavy criticism of accounting rules that permitted certain structured / special purpose entities and exposure to remain off - balance sheet. a key concern with such instruments and vehicles is that they have a tendency to veil the risks off - balance sheet and a robust accounting framework that provides for the recognition and disclosure of these risks is a prerequisite to their introduction. the iasb has tried to rectify the situation by introducing ifrs 10 on consolidated financial statements while the fasb has also worked towards toughening off - balance sheet accounting rules. 21. in india, the rbi has always followed a cautious and gradualist approach towards complex exotic financial products and has taken steps to reduce and contain the regulatory arbitrage between the banking and the shadow banking sectors ( mainly the non banking financial companies i. e. nbfcs ) by considerably upgrading the prudential rules for nbfcs. 22. overall accounting for financial instruments had become highly complex and rules based in the period leading up to the crisis and iasb ’ s project to replace ias 39 with ifrs 9 is a welcome initiative. however, delays in finalising proposals relating to impairment and hedge accounting coupled with recent proposals to reopen classification and measurement of financial assets are a cause of concern. iasb ’ s classification requirements for assets revolve around the business model approach whereas fasb ’ s approach is based more on the characteristics of the instrument. further, fasb ’ s approach may also entail more items in the balance sheet being carried at fair value. implementation of ifrs in india 23. the convergence to ifrs in india is a work - in - progress and i would like to dwell upon the implementation issues and challenges with particular reference to the indian banking system. 24. as part of the g20 ’ s efforts to evolve a single set of global high quality standards, the ministry of corporate affairs ( mca ), government of india released a roadmap that provided for a gradual convergence to ifrs in a phased manner commencing from april 1, 2011. in terms of the road map, commercial banks in india are required to converge with ifrs with effect from accounting periods beginning april