levels, inflation rates have persistently been below central banks ’ goals. the fact that inflation has been running below target in most advanced countries suggests that this challenge is not due to factors specific to a single country. instead, there are more systemic factors at play, with the root cause being a combination of low neutral interest rates and the lower bound on interest rates. investors are increasingly viewing these low inflation readings not as an aberration, but rather a new normal. this is evidenced by a broad - based decline in market - based measures of longerrun inflation expectations since the mid - 2000s, with the uk providing the exception, as shown in table 1. this downward slippage of longer - run inflation expectations, if it persists, implies that in the future central banks start further from their inflation goals and have even less room to maneuver, making the problem of low r - star and the zlb even more difficult. conclusion the zlb has been a topic of study for nearly two decades. but recent history and the outlook for the longer - term future, make it more relevant than ever. low inflation expectations, very low r - star, and slower growth all point to a challenging world where policymakers need to make the best use of the tools at their disposal to achieve their goals of strong economies and price stability. the key lessons from this research hold today and in the future. first, take swift action when faced with adverse economic conditions. second, keep interest rates lower for longer. and third, adapt monetary policy strategies to succeed in the context of low r - star and the zlb. these actions, taken together, should vaccinate the economy and protect it from the more insidious disease of too low inflation. thank you. 1 john c. williams, the research - policy nexus : zlb, jmcb and fomc, remarks at the conference celebrating the 50th anniversary of the journal of money, credit and banking, new york ( may 31, 2019 ). 2 john c. williams, the economic outlook : the ‘ new normal ’ is now, remarks at the economic club of new york, new york ( march 6, 2019 ). 3 david reifschneider and john c. williams, three lessons for monetary policy in a low - inflation era, journal of money, credit and banking, volume 32, issue 4, pp. 936 – 66, november 2000. 4 board of governors of the federal reserve system, fomc briefing.

means more effective see milton friedman, “ the role of monetary policy, ” american economic review, 58 : 1 ( march 1968 ), pp. 1 - 17. henry c. simons, “ rules versus authorities in monetary policy, ” journal of political economy, 44 : 1 ( february 1936 ). finn e. kydland and edward c. prescott, “ rules rather than discretion : the inconsistency of optimal plans, ” journal of political economy, 85 ( june 1977 ), pp. 473 - 491. bis central bankers ’ speeches communication of the decision - making process leads to more accurate expectations. when policy is set systematically, the public and financial market participants can form more accurate expectations about policy. policy is then less of a source of instability or uncertainty. the appropriate way to make policy systematic, or rule - like, is to base policy decisions on observable economic conditions. that is, policymakers should describe the reaction function that determines how the current and future policy rate will be set depending on economic data. i want to emphasize that a reaction function does not mean a timetable or a threshold for action. monetary policy should be data dependent, not date dependent. and the use of that data must recognize that policymakers are no more certain about future economic conditions than anyone else is. thus, the future path of policy will always be highly uncertain. however, a reaction function should explain how the policy rate will be determined in the future as a function of economic conditions. i also want to clear up some confusion about whether a reaction function is somehow mechanical. the science of monetary policy has not reached the point where we can specify a single optimal rule for setting policy and turn decision - making over to a computer. judgment is still required. because we do not know the true model of the economy, i would suggest the fomc begin by considering and reporting on a set of robust policy rules designed to have good results in a variety of models and across various stages of the business cycle. such robust rules recognize that data are measured imprecisely and are subject to revision. by considering such robust rules, the fomc might be able to move toward a consensus on a qualitative description of its reaction function as an important first step. for example, we would not have to specify the precise mathematical rule but would provide assessments of key variables and then communicate our policy decisions in terms of changes in these key variables. if policy were changed, then we would explain