subject because the government publishes additional measures of household saving. one such measure, produced by the federal reserve, uses different source data to estimate the same concept of savings. the fed measure suggests that households have been putting away about 3 to 4 percent of their income in recent years, a little more than estimated by the commerce department. but, importantly, it also shows the same precipitous decline since the early 1980s in the personal saving rate. interestingly, the fed ’ s study of this issue shows that the decline in the saving rate of households at the top 20 percent of the income distribution accounts for virtually all of the decline in the aggregate personal saving rate since 1989, the first year for which estimates on saving by income quintile are available. that is, the saving rates of the bottom 80 percent of the income distribution have fluctuated in a relatively narrow range and importantly have shown no secular decline since 1989. should we worry about the fall in the personal saving rate? do we need to worry about the fall in the personal saving rate? taking a big - picture point of view and asking whether the low rate signals that adjustments are needed for the future for the u. s. economy, the answer is a conditional “ yes ” ; but the period over which those adjustments will occur is very unclear. in the aggregate, an economy needs to generate savings for two basic purposes - to invest in new plant and equipment with the aim of raising future consumption growth and to expand the residential housing stock, thereby boosting the flow of housing services over time. thus, the act of saving is essentially about the allocation of an economy ’ s resources : some sector of the economy must be willing to consume less than its current income to free resources for the purchase of capital. intuitively, we often think of saving in financial terms : rather than spending our entire paycheck, we put money aside into savings accounts or certificates of deposits, and the bank lends this money to business ; or we lend directly to firms by buying corporate bonds or stocks. similarly, corporations save by not paying out all their profits to their stockholders. but underlying all these financial transactions is the reallocation of resources away from the immediate consumption of goods and services and toward the purchase of capital goods - goods that are not consumed directly but are instead used to produce future goods and services for consumption. how much should an economy save and invest? the answer comes down to a decision about what combination of capital and labor inputs minimizes

trend productivity growth. in light of these risks, and the general uncertainty regarding the economic outlook, i will continue to watch the data closely as i assess the appropriate path of monetary policy. the frequency and extent of data revisions over the past few years make the task of assessing the current state of the economy as well as predicting how the economy will evolve even more challenging, and i will remain cautious in my approach to considering future changes in the stance of policy. it is important to note that monetary policy is not on a preset course. my colleagues and i will make our decisions at each fomc meeting based on the incoming data and the implications for and risks to the outlook. while the current stance of monetary policy appears to be at a restrictive level, i remain willing to raise the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed. restoring price stability is essential for achieving maximum employment over the longer run. thank you, and i look forward to our conversation. 2 / 3 bis - central bankers'speeches 1 the views expressed here are my own and are not necessarily those of my colleagues on the federal reserve board or the federal open market committee. 3 / 3 bis - central bankers'speeches