because if either occurs, the impact on the global economy will be large. in the euro area, the european central bank has been raising its policy interest rate amid appreciation of the euro, and the sustainability of economic recovery should be watched carefully. in germany, fullscale fiscal consolidation has started ; for example, the value - added tax rate will be raised from january 1, 2007, and such measures may place downward pressure on the economy in the short term. in china, the economy continues to expand strongly, and there is a possibility that this growth will accelerate during the projection period, influenced by developments in fixed asset investments and exports. even though administrative measures will probably help to contain the rise in the growth rate of investment for some time, the risk of a further acceleration of the economy and subsequent repercussions cannot be ruled out, since the financial environment continues to be accommodative. global economic developments may also be influenced by international commodity prices, such as crude oil prices, depending on their future movements. the second risk is a further acceleration of business fixed investment. although firms, especially manufacturers, have been stepping up their business fixed investment, an excessive build - up of capital stock has not so far been observed in the economy overall. since firms are very careful in choosing their investment projects, business fixed investment as a whole has, despite recent acceleration, generally been kept within cash flow and the pace of increase in capital stock is moderate. in evaluating whether the growth in capital stock is excessive or not, developments not only in the moderately growing domestic market but also in strongly growing overseas markets need to be taken into account. with the economy continuing to expand moderately, financial conditions remain extremely accommodative. short - term interest rates have been very low relative to the state of economic activity and prices. the yen has been depreciating against other major currencies. the real effective exchange rate is currently as low as that recorded in the period immediately after the conclusion of the plaza accord in 1985. given such extremely accommodative financial conditions, firms may further accelerate investment based on optimistic assumptions of future profitability, such as favorable expectations regarding the growth rate, financing costs, and foreign exchange rates. such acceleration may push up overall growth in the short run, but may lead in turn to an excessive build - up of capital stock that could precipitate an economic slowdown. the upturn in land prices, particularly in major cities, is becoming more broad

for release on delivery 12. 30 pm edt march 21, 2022 restoring price stability remarks by jerome h. powell chair pro tempore board of governors of the federal reserve system at “ policy options for sustainable and inclusive growth ” 38th annual economic policy conference national association for business economics washington, d. c. march 21, 2022 thank you for the opportunity to speak with you today. let me first pause to recognize the millions who are suffering the tragic consequences of russia ’ s invasion of ukraine. at the federal reserve, our monetary policy is guided by the dual mandate to promote maximum employment and stable prices. from that standpoint, the current picture is plain to see : the labor market is very strong, and inflation is much too high. my colleagues and i are acutely aware that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing, and transportation. there is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level, and then to move to more restrictive levels if that is what is required to restore price stability. we are committed to restoring price stability while preserving a strong labor market. at our meeting that concluded last week, we took several steps in pursuit of these goals : we raised our policy interest rate for the first time since the start of the pandemic and said that we anticipate that ongoing rate increases will be appropriate to reach our objectives. we also said that we expect to begin reducing the size of our balance sheet at a coming meeting. in my press conference, i noted that action could come as soon as our next meeting in may, though that is not a decision that we have made. these actions, along with the adjustments we have made since last fall, represent a substantial firming in the stance of policy with the intention of restoring price stability. in my comments today, i will first discuss the economic conditions that warrant these actions and then address the path ahead for monetary policy. - 2the labor market is very strong and extremely tight to begin with employment, in the last few years of the historically long expansion that ended with the arrival of the pandemic, we saw the remarkable benefits of an extended period of strong labor market conditions. we seek to foster another long expansion in order to realize those benefits again. the labor market has substantial momentum. employment growth powered through the difficult omicron wave, adding 1. 75 million jobs over the