financial market distortions and the misallocation of resources that could lead to more, not less, economic instability. conclusion in summary, the u. s. economy is continuing to grow at a moderate pace. i expect annual growth of around 3 percent in 2012 and 2013. bis central bankers ’ speeches prospects for labor markets will continue to improve, with job growth strengthening and the unemployment rate falling gradually over time. i believe inflation expectations will be relatively stable and inflation will remain at moderate levels in the near term. however, with the very accommodative stance of monetary policy that has now been in place for more than three years, we must guard against the medium - and longer - term risks of inflation and further distortions such accommodation can create. monetary policy should be determined by economic conditions and not by a calendar date. and we should resist any notion that we can solve all of our economic challenges simply by an ever more accommodative monetary policy. bis central bankers ’ speeches

somewhat better pace than in 2012. this consistent pace of job growth was enough to drop the unemployment rate to 6. 6 percent in january. i expect that the unemployment rate will reach about 6. 2 percent by the end of 2014, and, if anything, that may prove too pessimistic. given the recent trends, an unemployment rate below 6 percent is certainly plausible. in terms of the other part of the fed ’ s mandate, inflation has been running somewhat below the fomc ’ s long - run goal of 2 percent. the fed ’ s preferred measure of inflation is the yearover - year change in the price index for personal consumption expenditures, or pce inflation. it came in at 1. 1 percent last year. it is important to defend our 2 percent inflation target both from below and above. yet, i anticipate, as the fomc indicated in its most recent statement, that inflation will move back toward our target over time. economic growth is firming, and some of the factors that have held inflation down, such as the one - time cut in payments to medicare providers, are likely to abate over time. an additional and important determinant of actual inflation is consumer and business expectations of inflation. i am encouraged that inflation expectations remain near their longer - term averages and consistent with our 2 percent target. given the large amount of monetary accommodation that we have added and continue to add to the economy, i think there is some upside risk to inflation in the longer term. of course, with any forecast, there are risks. while there continues to be some downside risk to growth, for the first time in years, i see the potential for more upside risk to the economic outlook. we need to consider this possibility as we calibrate monetary policy. monetary policy so let me turn to some issues for monetary policy. the federal reserve has taken extraordinary policy actions to support the economic recovery. the fed has lowered its policy rate – the federal funds rate – to essentially zero, where it has been for more than five years. since the policy rate cannot go any lower, the fed has attempted to provide additional accommodation through large - scale asset purchases. we are now in our third round of this quantitative easing. since september 2012, the fomc has added about $ 1. 3 trillion in long - term treasuries and mortgage - backed securities to its balance sheet through this program, buying at a pace of $ 85 billion a month in