me turn to the issue of “ how much, ” in other words, what federal funds rate target over the long term is consistent with our employment and inflation objectives. this issue is more difficult to judge for a number of reasons. first, it depends on how financial conditions evolve in response to our monetary policy adjustments. second, it depends on other factors, such as potential real gdp growth, which in turn, depends on the growth of the labor force and productivity growth trends. my current thinking, in this regard, is that the equilibrium federal funds rate consistent with 2 percent inflation will be somewhat lower in the future than in the past. in part, this reflects the likelihood that potential real gdp growth will likely be somewhat lower going forward due to slower growth in the labor force. but my confidence in this conclusion may change on the basis of incoming empirical evidence. in fact, i suspect my views will evolve as i see how the economy responds over time to higher interest rates and tighter financial market conditions. bis central bankers ’ speeches conclusion in my remarks today, i have provided my current thinking about the u. s. growth and the inflation outlook, and the implications for monetary policy. to sum up, the u. s. economic outlook looks brighter, with growth likely to be somewhat above the trend of the past five years. the risks to growth appear generally balanced, without unusually high risks that growth will either be much stronger or weaker than my forecast. on inflation, i remain confident, despite the recent softening, that inflation will begin to move up towards our 2 percent objective next year. this move will not likely happen immediately, however, given the recent weakness in energy prices and the fact that non - energy import price trends are also likely to soften a bit over the near - term. with respect to monetary policy, i believe that market expectations as captured by the most recent new york fed ’ s surveys of primary dealers and market participants are reasonable – with lift - off expected to take place sometime around the middle of next year. but, life is uncertain and my judgment of the appropriate timing could change in response to incoming data and other factors that change the economic outlook. when we do begin to tighten monetary policy, the pace of tightening will depend not only on the outlook but also on how financial market conditions respond as we begin to remove monetary policy accommodation. financial market conditions are an important transmission mechanism of monetary policy. this is why i don ’ t favor indiscriminately adhering to

, exclude food and energy prices. you may have concerns that the rise in commodity prices will turn out to be persistent and, if so, how this might impact the inflation outlook. bis central bankers ’ speeches from a policymaking standpoint, there are important factors that suggest that it would be unwise for the federal reserve to over - react to recent commodity price pressures by raising interest rates soon. why? first, despite the general uptrend, some of the recent commodity price pressures are likely to be temporary – due to poor weather or geopolitical uncertainties. this is certainly what is anticipated by market participants. second, even if commodity price pressures were to prove persistent, they have a smaller impact in the united states than they do in many other countries. relative to most other major economies, the u. s. inflation rate is lower, the amount of slack much greater and commodities represent a relatively small share of our consumption basket. this small share helps to explain why the “ pass - through ” of commodity prices into core measures of inflation has been very low in the united states for several decades. third, the federal reserve ’ s success in anchoring inflation expectations has also been important in limiting pass - through. since 1984, for example, when the federal reserve began to achieve success in driving down and then subsequently anchoring long - term inflation expectations, there has been very little evidence of commodity price pass - through into core inflation. in contrast, prior to 1984, when inflation expectations were much less wellanchored, pass - through did occur and, at times, played an important role in pushing underlying inflation higher. thus, while rising commodity prices may be giving some of you a bad headache, they are not likely to lead to a sustained rise in inflation to levels inconsistent with our dual mandate. we will have to ensure, however, that these pressures do not cause inflation expectations to become unanchored. if that were to occur, that would be a troublesome development that would complicate the pursuit of our dual mandate of high employment and low and stable inflation because we have an federal open market committee meeting next tuesday, i will not comment today on the implications of the economic outlook for monetary policy. outlook for the region and queens now, let me turn briefly to the situation here in the city and in queens, in particular. while the national economic outlook improved considerably during the latter part of 2010 and into early this year, growth in new york city ’ s economy appears to have