fed system its constitutional authority to manage the supply of money in the nation ’ s economy. congress designed the central bank to be decentralized, representative of all regions of the country and independent of the political process. the fed system is comprised of the board of governors in washington, d. c. – a federal agency currently led by chairman ben bernanke – plus 12 regional reserve banks that span the country. for example, the district overseen by the new york fed includes all of new see top winning videos of the new york fed ’ s financial awareness video competition on youtube : think twice before you swipe debt comedy jam credit card arrest bis central bankers ’ speeches york, the 12 northern counties of new jersey ; fairfield county, connecticut ; puerto rico and the u. s. virgin islands. each reserve bank is distinct, with its own charter and a board of directors drawn from its district, but overseen by the board of governors. the law that created the federal reserve made the central bank independent so that policymakers could make decisions about monetary policy in the national interest, somewhat insulated from political pressure. however, the fed is accountable to congress. congress has set an explicit objective for monetary policy : to pursue the highest level of employment consistent with price stability. this objective is often referred to as our “ dual mandate, ” because it combines two goals : high employment, and low and stable inflation. in order to promote these objectives, we also pay close attention to financial stability, because without financial stability, it is very hard to achieve our goals for jobs and inflation. the fomc consists of the board of governors plus the presidents of each of the 12 district banks, and it meets in washington, d. c., eight times per year to deliberate and vote on monetary policy. as the current new york fed president, i am vice chairman at these meetings and have a permanent vote. at these meetings, the committee members and i each present our current outlook for the economy. for these assessments, we augment input from our research departments with critical information about local economic conditions supplied by our boards of directors, regional advisory councils and conversations with local stakeholders. my visit to queens today is a part of these regional activities. one thing that makes my job even more interesting is that new york has some roles unique within the fed. for example, the new york fed is the reserve bank charged with implementing monetary policy. at the direction of the fomc, we buy and sell treasury securities. we

, in that permanent shocks to inflation are ruled out. the counterexample is if inflation follows a random walk process, whereby shocks have permanent effects on inflation, then uncertainty, as measured by the standard deviation from the distribution of future outcomes, rises linearly with the forecast horizon. applying theory to the real world in the years up to and including the first year of the pandemic, inflation had been running consistently below the fomc ’ s 2 percent longer - run target. then, in the spring of 2021, inflation readings surged, bringing the personal consumption expenditures ( pce ) inflation rate to around 6 percent, where it has remained through the first nine months of 2022. consumer price index ( cpi ) inflation rose by even more. this episode represents a unique opportunity to assess the three criteria of well - anchored expectations during a period of high and volatile inflation. 4 in empirically assessing the sensitivity and level of longer - run inflation expectations, one must specify what forecast horizon corresponds to the “ long run. ” surveys don ’ t typically ask about inflation in the “ long run, ” but rather the inflation rate over a specific period of time. a reasonable and oft - used benchmark of longer - run inflation expectations is to look at inflation five or more years in the future. such a forecast horizon is sufficiently long enough for typical business cycle dynamics and the effects of monetary policy on inflation to have played out, although under some circumstances, this may fall short of the “ long run ” implied by theory. over the past year and a half, measures of longer - run inflation expectations have been insensitive to the rapid rise in inflation. figure 1 shows the time series of these measures of longer - run inflation expectations. this includes median expectations from the survey of professional forecasters ( spf ) for inflation measured by the pce price index 6 - 10 years in the future ; breakeven inflation rates 6 - 10 years in the future as implied by nominal and inflation - protected u. s. treasury securities ; and the university of michigan survey of inflation expected over the next 5 - 10 years. 5 realized 12 - month cpi inflation is also shown in the figure for reference. as seen in figure 1, spf longer - run inflation expectations have remained remarkably stable over the past year and a half, while the market - based measure and the michigan survey rose modestly during 2021 before retracing some of those gains this year. because the michigan survey asks about inflation over