have been deemed no longer necessary and shut down – not only helped stabilize financial conditions and restart the flow of credit to american families and businesses, they did so at no financial cost to taxpayers and with no credit losses. beyond its actions to help stabilize the financial system, the federal reserve also responded to the deepening recession with an aggressive monetary policy, in both conventional and less conventional forms. we lowered interest rates sharply, including, in october 2008, an unprecedented coordinated rate cut with five other major central banks. for the past 15 months, we have maintained our target short - term interest rate near zero. in a less conventional operation, we also purchased more than $ 1. 7 trillion of treasury securities and securities issued or guaranteed by the housing - related gses. these purchases contributed to a marked improvement in credit markets. in particular, they significantly lowered mortgage interest rates, which made housing more affordable and allowed millions of americans to reduce their payments by refinancing. finally, the federal reserve also responded to the crisis in its capacity as a bank supervisor. last spring we led a forward - looking, simultaneous evaluation of the financial conditions and capital positions of 19 of the largest bank holding companies in the united states, with the in addition, a number of foreign governments – including the united kingdom, ireland, germany, belgium, france, the netherlands, luxembourg, and iceland – took steps to prevent the disorderly failures of distressed financial firms. treasury committing to provide public capital as needed. the goal of the supervisory capital assessment program – popularly called the stress test – was to ensure that these firms held sufficient capital, in both quantity and quality, to withstand worse - than - expected economic conditions over the subsequent two years and yet remain healthy and capable of lending to creditworthy borrowers. 2 this exercise was unprecedented in scale and scope, as well as in the range of information we made public regarding the projected losses and revenues of the tested firms, which allowed private analysts to judge for themselves the credibility of the exercise. markets responded favorably to the release of the stress test results, and many of the tested banks were able to raise substantial amounts of capital from investors and to repay government capital. overall, the policy actions implemented over the past two and a half years by the federal reserve and other agencies in the united states and abroad have helped stabilize key global financial markets : short - term funding markets are essentially back to normal, corporate bond issuance has been strong, and stock prices have partially recovered. bank lending remains constrained

all types of shocks and can at times be misleading about what is happening to the underlying rate of overall inflation. and if increases in headline inflation prove more persistent than initially expected, central bankers must be vigilant to ensure that they do not become embedded into expectations and thereby generate substantial second - round effects on inflation. finally, because price stability ultimately involves control of overall, headline inflation, which after all is the inflation measure that households really care about, central bankers should and do pay attention to headline inflation as well as to core inflation measures. a core inflation measure should not be seen as a substitute for thorough and careful analysis of the forces that are driving our economy and the inflation process. more details on inflation forecasting at the board are in bernanke ( 2007 ). references aoki, kosuke ( 2001 ). " optimal monetary policy responses to relative price changes ", journal of monetary economics, vol. 48 ( august ), pp. 55 - 80. armour, jamie ( 2006 ). " an evaluation of core inflation measures ", bank of canada working paper 2006 - 10 ( ottawa : bank of canada, march ). bagliano, fabio c., and claudio morana ( 2003 ). " measuring u. s. core inflation : a common trends approach ", journal of macroeconomics, vol. 25 ( june ), pp. 197 - 212. bean, charles ( 2006 ). " commentary : impact of globalization on monetary policy ( 40 kb pdf ) ", speech delivered at the federal reserve bank of kansas city 30th annual economic symposium, jackson hole, wyo., august 26, www. kansascityfed. org / publicat / sympos / 2006 / sym06prg. htm. bernanke, ben s. ( 2007 ). " inflation expectations and inflation forecasting ", speech delivered at the monetary economics workshop of the national bureau of economic research summer institute, cambridge, mass., july 10, www. federalreserve. gov / newsevents. blinder, alan s. ( 2006 ). " monetary policy today : sixteen questions and about twelve answers ", in s. fernandez de lis and f. restoy, eds., central banks in the 21st century. madrid : banco de espana, pp. 31 - 72. bodenstein, martin, christopher erceg, and luca guerrieri ( 2007 ). " optimal monetary policy in a model with distinct core