decision making. this structure is replicated on the federal open market committee, which is the body that makes decisions about our nation ’ s monetary policy through changes in an interest rate known as the federal funds rate, and, over the last couple of years, changes in the size of the federal reserve ’ s balance sheet and the interest rate it pays on excess reserves. the fomc is made up of 12 members : seven of them are the federal reserve governors who have been appointed by the president and confirmed by the senate. governors always have a vote at the fomc. the other five members are presidents of the regional federal reserve banks who are appointed by their local boards of directors. the new york bank ’ s president always has a vote, and the other 11 presidents share the remaining four votes in a set rotation. as a result, while all 12 reserve bank presidents are active participants in the fomc debate, the seven politically appointed governors always have a majority of votes over the five voting reserve bank presidents. the regional bank presidents fill a critical role at the fed ’ s policy table. they have the responsibility of representing their respective federal reserve districts in providing their unique perspective on national policy issues. as dictated by the fomc ’ s structure, washington and wall street not only participate in all discussions but have a permanent vote. therefore, it is crucial to have independent voices at the table that regularly interact with main street business and community leaders in the rest of the country. in this structure, it is a key point to remember that each member was given a vote, not an advisory role. in fomc policy votes since 1995 – which is essentially the current era of fed policy – there was a dissenting vote about one - third of the time. going back a bit earlier in bis central bankers ’ speeches the 1990s to the ’ 90 – 91 recession, there were far more significant levels of dissent for both tighter and less restrictive monetary policy. during the paul volcker era, the chairman nearly lost one policy vote. in addition, there were 30 dissenting votes cast in volcker ’ s final 30 meetings as fed chairman. transparency there are, of course, commonalities between the end of the volcker era, the 1990 – 91 recession and today : in each of these periods the economy was poised at a critical juncture and broad disagreement prevailed about the appropriate policy course – and not just around the fed policy table. by the very nature of our political system, these were

six months, and if history is any guide, we should see these increases accelerate over the course of the year. i would also note that our manufacturing survey points to expected gains in production and capital spending, which will contribute to improving job growth. even so, with the number of people out of work and the growing numbers of new job entrants, it will be some time before we see the unemployment rate well below 9 percent. given the immediate levels of slack in the economy, core inflation will remain modest in the near term. however, given the degree of monetary and fiscal stimulus in place in the economy currently, inflation should move higher over the medium and longer term, depending on what further steps are taken in these policy areas. also, the risk of further disinflation or outright deflation is small and, with an improving economy, should only decline further in the coming months. it is also noteworthy that long - run inflation expectations even now remain above 2 percent and should exert upward pressure on inflation during the course of the recovery. there are, of course, risks to the outlook. first, i am concerned about what might happen to the economy if we fail to deal successfully with our long - run fiscal challenges. the budget deficit is the largest we have seen, as a share of gdp, since world war ii. with these large budget deficits, total federal debt outstanding is almost $ 14 trillion, or about 94 percent of gdp. moreover, projections of deficits and debt show the federal debt will continue to increase, suggesting that fiscal policy is unsustainable and must be changed soon. as we have seen elsewhere, the reaction of interest rates and exchange rates to unsustainable fiscal policy can be sharp and disruptive. while specific recommendations on fiscal policy are not the purview of the federal reserve, i would urge serious consideration of proposals that have been offered by several groups, including the simpson - bowles deficit reduction plan. these are reasonable starting points for addressing the intractable problem that may have very serious ramifications for future monetary policy. a second concern i have is the consequences that will follow when we combine our current fiscal projections with a highly accommodative monetary policy. in essence, the federal open market committee ( fomc ) has maintained an emergency monetary policy stance in a recovering economy and has continued to ease into the recovery. i believe these actions risk creating a new set of imbalances, or bubbles. importantly, such