economic projections for real gdp growth reported by blue chip economic indicators moved down from 2. 9 percent in march 2007 to 2. 1 percent in march 2016. 4. see robert f. martin, teyanna munyan, and beth anne wilson ( 2014 ), “ potential output and recessions : are we fooling ourselves? “ ifdp notes ( washington : board of governors of the federal reserve system, november 12 ). 5. see olivier blanchard, eugenio cerutti and lawrence summers ( 2015 ), “ inflation and activity – two explorations and their monetary policy implications, ” imf working paper wp / 15 / 230, 2015 ( washington : international monetary fund ). 6. see, for example, “ new oecd indicators trace productivity growth slowdown pre - and post - crisis. ” 7. see robert j. gordon ( 2016 ), the rise and fall of american growth : the u. s. standard of living since the civil war ( princeton, n. j. : princeton university press ). 8. see erik brynjolfsson and andrew mcafee ( 2014 ), the second machine age : work, progress, and prosperity in a time of brilliant technologies ( new york : w. w. norton ). 9. see ryan a. decker, john haltiwanger, ron s. jarmin and javier miranda ( 2016 ), “ declining business dynamism : what we know and the way forward, ” amercian economic review, vol. 106 ( may ), pp 203 – 07 ; ryan decker, john c. haltiwanger, ron jarmin, and javier miranda ( forthcoming ), “ where has all the skewness gone? the decline of high - growth ( young ) firms in the u. s. ” european economic review ; and jorge guzman and scott stern ( 2016 ), “ the state of american entrepreneurship : new estimates of the quantity and quality of entrepreneurship for 15 us states, 1988 - 2014, ” nber working paper series 22095 ( cambridge, mass : national bureau of economic research, march ). 10. see lucia foster, john haltiwaner and c. j. krizan ( 2001 ) “ aggregate productivity growth : lessons from microeconomic evidence ” in new developments in productivity analysis, charles hulten, ediwn dean and michael harper, eds. ( cambridge, mass : national bureau of economic research, march ). 11. see steven davis and

slack in the economy. but the relationship between slack and inflation has weakened substantially over the years. in addition, inflation depends importantly on the inflation expectations of workers and firms. a widely shared view among economists today is that, unlike during the 1970s, expectations are no longer heavily influenced by fluctuations in inflation, but are fairly constant, or anchored. for both these reasons, inflation has become less responsive to cyclical changes in the economy. we measure inflation expectations through surveys of forecasters and the general public, and also through market readings on inflation swaps and “ breakevens, ” which represent inflation compensation as measured by the difference between the return offered by nominal treasury securities and that offered by tips. since mid - 2014, these market - based measures have declined significantly to historically low levels. some of this decline probably represents lower bis central bankers ’ speeches risk of high inflation, or an elevated liquidity preference for much more heavily traded nominal treasury securities, rather than expectations of lower inflation. some survey measures of inflation expectations have also trended down. given the importance of expectations for determining inflation, these developments deserve, and receive, careful attention. while inflation expectations seem to me to remain reasonably well anchored, it is essential that they remain so. the only way to assure that anchoring is to achieve actual inflation of 2 percent, and i am strongly committed to that objective. looking ahead my baseline expectation has been that our economy is likely to continue on its path of growth at around 2 percent. i have also expected the ongoing healing in labor markets to continue, with healthy wage increases and job creation. as the economy tightens, i have expected that inflation will move up over time to the committee ’ s 2 percent objective. for some time, the principal risks to that outlook have been from abroad. global economic and financial conditions are particularly important for the u. s. economy at the moment. weakness in economic activity around the world and related bouts of financial volatility have weighed on the performance of our economy. given the stronger performance of the u. s. economy, the trade - weighted value of the dollar has risen roughly 20 percent since 2014. such a large appreciation of the dollar means that we will “ export ” some of our strength to our trading partners and “ import ” some of their weakness. growth and inflation remain stubbornly low for most of our major trading partners. european and japanese authorities have limited scope to respond, with daunting longer - run fiscal challenges and policy rates already set below