keep a close eye on inflation with the goal of keeping it near 2 percent. looking ahead, my colleagues on the fomc and i expect that, with appropriate monetary policy, the job market will remain strong and inflation will stay near 2 percent over the next several years. this judgment reflects several factors. first, interest rates, and financial conditions more broadly, remain favorable to growth. second, our financial system is much stronger than before the crisis and is in a good position to meet the credit needs of households and businesses. third, federal tax and spending policies likely will continue to support the expansion. and, fourth, the outlook for economic growth abroad remains solid despite greater uncertainties in several parts of the world. what i have just described is what we see as the most likely path for the economy. of course, the economic outcomes we experience often turn out to be a good deal stronger or weaker than our best forecast. for example, it is difficult to predict the ultimate outcome of current discussions over trade policy as well as the size and timing of the economic effects of the recent changes in fiscal policy. overall, we see the risk of the economy unexpectedly weakening as roughly balanced with the possibility of the economy growing faster than we currently anticipate. monetary policy over the first half of 2018 the fomc has continued to gradually reduce monetary policy accommodation. in other words, we have continued to dial back the extra boost that was needed to help the economy recover from the financial crisis and recession. specifically, we raised the target range for the federal funds rate by 1 / 4 percentage point at both our march and june meetings, bringing the target to its current range of 1 - 3 / 4 to 2 percent. in addition, last october we started gradually reducing the federal reserve ’ s holdings of treasury and mortgage - backed securities. that process has been running smoothly. our policies reflect the strong performance of the economy and are intended to help make sure that this trend continues. the payment of interest on balances held by banks in their accounts at the federal reserve has played a key role in carrying out these policies, as the current monetary policy report explains. payment of interest on these balances is our principal tool for keeping the federal funds rate in the fomc ’ s target range. this tool has made it possible for us to gradually return interest rates to a more normal level without disrupting financial markets and the economy. as i mentioned, after many years of running below our longer - run objective of 2

surprising for eurosceptics. from 1999 until the outbreak of the crisis, the euro area created 15 million jobs, twice the figure in the us, and cut its unemployment level by two points, to 7. 6 %. per capita income increased almost 14 % in just one decade, and productivity by 7 %. our savings rate is consistently more than double that of the us or britain, our contribution to global imbalances nil, with our external accounts being almost in balance, and our public finances, despite the difficulties, show a deficit standing at around 4 % of gdp in 2011, less than half that of the us. not surprisingly, seven out of ten residents of the euro area with an opinion, according to the latest eurobarometer, think that the euro has been a good thing. and the euro is also viewed worldwide as the most successful symbol of europe ’ s integration, which started half a century ago. so, we do not have to resort to mark twain to conclude that the rumours about the death of the euro may be somewhat exaggerated. however, it is undeniable, and this is the great paradox, that europe now finds itself in the focus of global financial stress due to the sovereign debt crisis. but this is not a euro crisis. it cannot be when the reaction of governments to the crisis has been to consistently renew their commitment to integration. it is a crisis of market confidence in the willingness and ability of some countries to comply with the demands of the euro – and a crisis of the design of the institutional foundations of the single currency. let me briefly explain the reasons for this institutional fragility. 3. the institutional weakness of the euro from its very conception, like all the big steps in the history of european integration, the euro has been an ambitious and unique project. it combined a centralised monetary policy with decentralised but coordinated economic policies. paraphrasing tommaso padoa - schioppa, we decided to give ourselves a currency that doesn ’ t belong to any single nation - state. the advent of the euro was only an episode – surely the most significant in history – of the construction of a post - westphalian order of shared sovereignties. one of the key lessons that we have learned from the crisis is that the design of the euro was incomplete. indeed, the euro area lacks certain institutional elements which we associate with federations and which act as shock - absorbers, countering the negative effects of shocks and