the length of the forecast horizon is particularly relevant at the current juncture in considering the projections for output growth and unemployment. because of the recent adverse shocks to the economy - - including turmoil in financial markets and the sharp increase in the prices of oil - - output growth in recent quarters has fallen below potential, and the range of projections from the april fomc meeting was 1. 5 percent to 2 percent for overall pce, while the central tendency was 1. 8 percent to 2 percent ( fomc, 2008 ). this is particularly true when the underlying level of inflation is reasonably close to the mandate - consistent rate, as i believe to be the case at the present time. the unemployment rate is, as best as i can judge, above the natural rate. similarly, sharp increases in the prices of many commodities have driven inflation above rates consistent with price stability. even under appropriate monetary policy, committee forecasts of inflation, output growth, and unemployment might not settle at their respective long - run rates within the three - year horizon, obscuring committee participants'views about these key parameters. this problem may currently be somewhat less acute for the current set of inflation projections, because inflation is projected to moderate to about 2 percent or below by the end of the projection period. nevertheless, to the extent that some slack in economic activity is projected to persist through 2010, that slack might well induce a modest further decline in inflation, implying that policymakers'projections for inflation in 2010 might be a bit higher than their assessments of the mandate - consistent inflation rate. empirical evidence my discussion of room for improvement relative to the federal reserve's current communication strategy has been theoretical. there is, fortunately, evidence from a number of countries that have adopted an explicit numerical goal for inflation, including canada, new zealand, sweden, and the united kingdom. 18 and there is also evidence from the experience of the european central bank ( ecb ), which has not adopted an explicit numerical goal but has provided a fairly precise verbal description of its commitment to keeping inflation " below, but close to, 2 percent in the medium term. " 19 further details on the experiences of these countries - - as well as other economies that have adopted explicit numerical inflation objectives - - may be found in mishkin and posen ( 1997 ), bernanke and others ( 1999 ), and mishkin and schmidt - hebbel ( 2001, 2007 ). see ecb ( 2003, p. 6 ).

, recovery planning is actually an even more important issue. because fmus provide critical services to the industry, experiencing a major disruption that could lead to resolution – or dissolution – is unacceptable. it is important, then, that a ccp be structured in a way, and develop and have tools available, to enable it to recover from losses and continue operations under extreme scenarios. simply put, the debate on ‘ less complex ’ for financial market utilities is much more about recovery than it is about resolution. steadfast resiliency may include casting a more critical eye on the resources needed for a single ccp to withstand a plausible, severe shock. conclusion while there is still work that needs to be done to make financial institutions more resilient, better managed and less complex, we have also made a great deal of progress. i ’ d like to close my remarks by highlighting some of the practical steps we are taking on the supervisory side to continue that progress. • first, through collaboration and communication with other supervisors, both domestic and foreign, we are continuing to work across global firms to address issues together and break down barriers to sharing information and coordinating better among supervisors. i ’ d say this is still a work in progress. bis central bankers ’ speeches • second, we need to continue to communicate our relevant supervisory findings in a timely manner and our communication needs to be candid and direct. still too often i find that we don ’ t say what we mean the first time – and this leads to confusion and, at times, bad outcomes. • lastly, we need to be more proactive in establishing an open dialogue with the directors of the financial institutions we supervise. we look to the directors to flag for us the key risks that keep them up at night. and, it is our obligation to explain the intuition behind our supervisory concerns and the rationale for needed change. thank you for your attention today. i would be happy to answer a few questions. bis central bankers ’ speeches