factors that may be influencing term premiums, including an improved economic outlook, higher treasury debt issuance, concerns about future inflation risk, and higher uncertainty about the future path of the economy and monetary policy. any or all of these factors may contribute to the movement of longer - dated yields. i will continue to monitor these and the broader financial conditions to observe changing conditions and any potential effects on economic activity and inflation and to better understand the implications for appropriate monetary policy. i am also closely watching liquidity conditions and treasury market functioning, which have held up well so far even amidst large movements in yields. the u. s. treasury market plays a central role in the transmission of monetary policy, in financing the federal government, and in providing safe and liquid assets to support the flow of capital and credit to households and businesses. treasury market liquidity strains could be amplified and spill over to related financial markets if longer - dated treasury securities experience an abrupt selloff and investors reposition their portfolios in response to a 2 / 12 bis - central bankers'speeches rapid increase in long - term treasury yields. financial market volatility spurred by additional geopolitical shocks could further strain financial market functioning. these risks could be exacerbated if bank holding company - affiliated market makers experience balance sheet constraints during periods of volatility. it is also important that treasury markets remain resilient and stable. more broadly, i believe we should keep in mind that we don't yet know the effects of tightened financial conditions on economic activity and inflation. there is an unusually high level of uncertainty regarding the economy and my own economic outlook, especially considering recent surprises in the data, data revisions, and ongoing geopolitical risks. but i will be closely watching the incoming data as i assess the implications for the economic outlook and appropriate monetary 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 meeting based on the incoming data. i remain willing to support raising the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or is insufficient to bring inflation down to 2 percent in a timely way. returning inflation to the fomc's 2 percent goal is necessary to achieve a sustainably strong labor market and an economy that works for everyone. i will turn now to address recent developments in the ongoing reform of the bank regulatory framework. while this is by no means a comprehensive list of all recent reforms

their exchange rates? should they aim for floating exchange rates or for fixed but adjustable exchange rates? or should they establish a currency board? some countries are even debating whether or not to abolish their currency entirely. this is a decision that requires serious consideration. the abandonment of a sovereign currency would deprive the national economic policy of the ability to take action in two fields : exchange rate policy and monetary policy. the question as to which currency to orient one ’ s economy to is only of secondary importance and is determined mainly by trade flows. many emerging economies have been forced to learn that today, monetary issues can hardly be separated from topics such as the functioning of international financial markets or the soundness of the national banking system. the financial crises in asia, latin america and russia have shown that the exchange rate policy has often been too rigid, as : – it prevented domestic monetary policy from curbing liquidity sufficiently ; and – the apparent exchange rate guarantee towards the dollar all but invited residents to incur debt in us dollars. these experiences must be taken into consideration whenever emerging economies seek to peg their currencies to one of the poles. pegging a currency can actually help to improve the standing of the country on the international financial markets. it can also help to establish internal discipline. this can enhance credibility. however, such pegs have their limits where, during periods of tranquillity, disequilibria develop which cannot be adjusted appropriately. a currency board has its limits, too. it can make a contraction of the domestic money stock - at least temporarily - necessary with accordingly high interest rates. to see this through, a country needs a sound financial sector, and its real economy must have sufficient flexibility. iii therefore, there is no one - size - fits - all method of managing a tripolar world. the euro, the dollar and the yen are all in a state of healthy competition with one another. the international monetary system as a whole can only profit from this competition. three conditions serve to promote a healthy competition : – first, a lot of common ground is necessary regarding the anti - inflationary stance of the countries ’ monetary policy ; – second, further sustainable progress in consolidating public sector budgets is needed - especially in europe ; – third, the currency areas have to rise to the economic challenges. the usa has to prove that its large external debt is justified by its growth, innovative power and efficiency. in europe it is important to enhance competitiveness and to