consumers, and investors. while the official sector provides a stable currency, operates some important payment rails, and undertakes regulation and oversight of financial intermediaries and critical financial market infrastructures, the private sector brings competitive forces encouraging efficiency and new product offerings and driving innovation. responsible innovation has the potential to increase financial inclusion and efficiency and to lower costs within guardrails that protect consumers and investors and safeguard financial stability. as we assess the range of future states of the financial system, it is prudent to consider how to preserve ready public access to government - issued, risk - free currency in the digital financial system — the digital equivalent of the federal reserve ’ s issuance of physical currency. the board recently issued a discussion paper that outlines the federal reserve ’ s current thinking on the potential benefits, risks, and policy considerations of a see board of governors of the federal reserve system, “ major events in the history of the federal reserve ’ s role in the u. s. payment system, ” in the fed explained : what the central bank does, 11th ed. ( washington : board of governors of the federal reserve system, december 2021 ), https : / / www. federalreserve. gov / aboutthefed / files / the - fed - explained. pdf # page = 91. - 6u. s. cbdc. 12 the paper does not advance any specific policy outcome and does not signal that the board will make any imminent decisions about the appropriateness of issuing a u. s. cbdc. it lays out four cbdc design principles that analysis to date suggests would best serve the needs of the united states if one were created. those principles are that a potential cbdc should be privacy - protected, so consumer data and privacy are safeguarded ; intermediated, such that financial intermediaries rather than the federal reserve interface directly with consumers ; widely transferable, so the payment system is not fragmented ; and identity - verified, so law enforcement can continue to combat money laundering and funding of terrorism. financial stability given the federal reserve ’ s mandate to promote financial stability, any consideration of a cbdc must include a robust evaluation of its impact on the stability of the financial system — not only as it exists today but also as it may evolve in the future. in consideration of the financial system today, it would be important to explore design features that would ensure complementarity with established financial intermediation. a cbdc — depending on its features — could be attractive as

interest rates so low? 2 in a speech last month, i identified a number of factors that have worked to boost saving, depress investment, or both. among the factors holding down interest rates is the sluggishness of foreign economic growth. another is demographics, with saving being higher as a result of an increase in the average age of the u. s. population. also, investment recently has been weaker than might otherwise be expected, perhaps reflecting uncertainty about longer - run growth prospects, as well as the decline in investment in the energy sector as a result of the fall in the price of oil. finally, and most important, weak productivity growth has likely pushed down interest rates both by lowering investment, as firms lower their expectations for the marginal return on investment, and by increasing saving, as consumers lower their expectations for income growth and borrow less and / or save more as a consequence. understanding the recent weakness of productivity growth is central to addressing the longer - run challenges confronting the economy. productivity growth over the past decade has been lackluster by post - world war ii standards. output per hour increased only 1 - 1 / 4 percent per year, on average, from 2006 to 2015, compared with its long - run average of 2 - 1 / 2 percent from 1949 to 2005. this halving of productivity growth, if it were to persist, would have wide - ranging consequences for living standards, wage growth, and economic policy more broadly. a number 1 / 2 bis central bankers'speeches of explanations have been offered for the decline in productivity growth, including mismeasurement in the official statistics, depressed capital investment, and a falloff in business dynamism, with reality likely reflecting some combination of all of these factors and more. we should also consider the possibility that weak demand has played a role in holding back productivity growth, although standard economic textbooks generally trace a path from productivity growth to demand rather than vice versa. chair yellen recently spoke on the influence of demand on aggregate supply. 3 in her speech, she reviewed a body of literature that suggests that demand conditions can have persistent effects on supply. 4 in most of the literature, these effects are thought to occur through hysteresis in labor markets. but there are likely also some channels through which low aggregate demand could affect productivity, perhaps by lowering research - and - development spending or decreasing the pace of firm formation and innovation. i believe that the relationship between productivity growth and the strength of aggregate demand is an area