a communications challenge. we have not described how policy will be conducted after the unemployment rate passes 6. 5 percent. last summer, it was thought that we would stop asset purchases by the time unemployment reached 7 percent. well, that didn ’ t happen. what is the argument for continuing to increase monetary policy accommodation when labor market conditions are improving more quickly than anticipated and inflation has stabilized and is projected to move back to goal? the longer we continue purchases in such an environment, the more likely we will fall behind the curve in reducing the extraordinary degree of monetary policy accommodation. with the economy awash in reserves, the costs of such a misfire could be considerably higher than usual, fomenting higher inflation and perhaps financial instability. my preference was, and remains, to scale back our purchase program at a faster pace to reflect the strengthening economy. given the falling unemployment rate, our communications should be focused on how economic conditions will determine the interest rate path. continuing to buy assets is neither helpful nor essential. for more on the subject, see charles i. plosser, “ the outlook and the hazards of accelerationist policy, ” remarks before the university of delaware center for economic education and entrepreneurship, newark, de, february 14, 2012. bis central bankers ’ speeches conclusion in summary, i believe that the economy is continuing to improve at a moderate pace. we are likely to see growth of around 3 percent in 2014. prospects for labor markets will continue to improve, and i expect the unemployment rate will continue its decline, reaching 6. 2 percent by the end of 2014. i also believe that inflation expectations will be relatively stable and that inflation will move up toward our goal of 2 percent over the next year. on monetary policy, we must back away from increasing the degree of policy accommodation in a manner commensurate with an improving economy. reducing the pace of asset purchases to $ 65 billion a month is moving in the right direction, but that may prove to be insufficient if the economy continues to play out according to the fomc forecasts. i believe the economy has met the criteria for ending the asset purchases as there has been significant improvement in labor market conditions. i also believe that further increases in the balance sheet are unlikely to provide appreciable benefits for the recovery and may have unintended consequences. a case can be made for ending the current asset purchase program sooner to reflect the improvement in the economic outlook and to lessen some of the communications problems we will face with

fomc. here again, congress has designed the system with a number of checks and balances. since 1935, the composition of the fomc has included the seven governors in washington, who are appointed by the president of the united states and confirmed by the senate, as well as the president of the new york fed, and four other reserve bank presidents who serve one - year terms as members on a rotating basis. whether we vote or not, all reserve bank presidents attend the fomc meetings, participate in the discussions, and contribute to the committee ’ s assessment of the economy and policy options. the fomc has eight regularly scheduled meetings each year to set monetary policy. the first one in 2014 was held just two weeks ago. in normal times, the committee votes to adjust short - term interest rates to achieve the goals of monetary policy that congress has set for us. congress spelled out the current set of monetary policy goals in 1978. the amended federal reserve act specifies that the fomc “ shall maintain long run growth of the monetary and credit aggregates commensurate with the economy ’ s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long - term interest rates. ” since moderate long - term interest rates generally result when prices are stable and the economy is operating at full employment, many have interpreted these instructions as being a dual mandate to manage fluctuations in employment in the short run while preserving price stability in the long run. economic conditions in order to determine the appropriate monetary policy to promote these goals, the fomc must monitor and assess economic developments. so, let me turn to an assessment of our economy as we enter 2014. in a nutshell, my view is that the economy is on firmer footing than it has been for the past several years. so let ’ s look at some of the details of how last year ended and the implications for the coming year. bis central bankers ’ speeches real output grew at a 3. 2 percent annual pace in the fourth quarter of last year, following a 4. 1 percent growth rate in the third quarter. that means economic growth doubled in the second half of 2013 compared with the first half. consumer spending and business investment in equipment ended the year with strong increases. inventory investment and net exports also contributed to growth. on the other side of the ledger, a decline in residential investment and a sharp decrease in federal government spending subtracted from growth in the