that number can and probably will change over time, but whatever the destination, there will be a variety of ways to get there, with the speed and timing of cuts determined by economic conditions we encounter on the way. the motivation for continuing to cut the policy rate at the fomc's next meeting begins with how restrictive the current setting is. after we cut by 75 basis points, i believe the evidence is strong that policy continues to be significantly restrictive and that cutting 3 / 4 bis - central bankers'speeches again will only mean that we aren't pressing on the brake pedal quite as hard. although monthly core inflation has flattened out in recent months, there is no indication that the pace of price increases for key service categories such as housing and nonmarket services should remain at their current levels or increase. another factor that supports a further rate cut is that the labor market appears to finally be in balance, and we should aim to keep it that way. conversely, based on what we know today, one could argue that there is a case for skipping a rate cut at the next meeting. monthly readings on inflation have moved up noticeably recently, and we don't know whether this uptick in inflation will persist, or reverse, as we saw a year ago. due to strikes and hurricanes, recent labor market data are giving us a cloudy view of the true state of the labor market that won't be clearer for a couple of months. as a result, one could advocate for not changing the policy rate at our upcoming meeting and adjusting our policy stance in a measured way going forward. in fact, if policymakers'estimates of the target range at the end of next year are close to correct, then the committee will most likely be skipping rate cuts multiple times on the way to that destination. in deciding which of these two approaches to take at the fomc's next meeting, i will be watching additional data very closely. tomorrow, we get the labor department's job openings and labor turnover survey. on friday, we get the employment report, which, as i noted, may have misleading payroll data. then next week, we get consumer and producer price indexes for november, which will allow a good estimate of pce inflation for the month. finally, on the first day of the fomc meeting, we receive retail sales data for november that will give us an idea of how consumer spending is holding up. all of that information will help me decide whether to cut

and access to credit remained restricted for many potential borrowers. consumer sentiment, which dropped sharply last summer, has since rebounded but remains relatively low. in the housing sector, affordability has increased dramatically as a result of the decline in house prices and historically low interest rates on conventional mortgages. unfortunately, many potential buyers lack the down payment and credit history required to qualify for loans ; data for the fourth quarter of 2011 from the national income and product accounts reflect the advance estimate released on january 27, 2012. in january, 5 - 1 / 2 million persons among those counted as unemployed – about 43 percent of the total – had been out of work for more than six months, and 8 - 1 / 4 million persons were working part time for economic reasons. bis central bankers ’ speeches others are reluctant to buy a house now because of concerns about their income, employment prospects, and the future path of home prices. on the supply side of the market, about 30 percent of recent home sales have consisted of foreclosed or distressed properties, and home vacancy rates remain high, putting downward pressure on house prices. more - positive signs include a pickup in construction in the multifamily sector and recent increases in homebuilder sentiment. manufacturing production has increased 15 percent since the trough of the recession and has posted solid gains since the middle of last year, supported by the recovery in motor vehicle supply chains and ongoing increases in business investment and exports. real business spending for equipment and software rose at an annual rate of about 12 percent over the second half of 2011, a bit faster than in the first half of the year. but real export growth, while remaining solid, slowed somewhat over the same period as foreign economic activity decelerated, particularly in europe. the members of the board and the presidents of the federal reserve banks recently projected that economic activity in 2012 will expand at or somewhat above the pace registered in the second half of last year. specifically, their projections for growth in real gdp this year, provided in conjunction with the january meeting of the federal open market committee ( fomc ), have a central tendency of 2. 2 to 2. 7 percent. 3 these forecasts were considerably lower than the projections they made last june. 4 a number of factors have played a role in this reassessment. first, the annual revisions to the national income and product accounts released last summer indicated that the recovery had been somewhat slower than previously estimated. in addition, fiscal and financial strains in