studies, or cemla. i would be remiss if, before ending, i did not note the strong leadership that governor agustin carstens continues to provide at the bank of mexico. his leadership in economic policy, in several key roles, has been instrumental in solidifying the progress that mexico has made over the past two decades. agustin has also built an impressive record in the international policy community more broadly. he is currently the chair of the bis consultative council for the americas, has recently been appointed chair of the bis economic bis central bankers ’ speeches consultative committee and the global economy meeting, and played a key role in mexico ’ s successful presidency of the g - 20 last year. to conclude, i would like to congratulate the bank of mexico on the 20th anniversary of its independence. i wish you a productive conference marking this auspicious occasion. and i wish the bank of mexico continued success in its work to stabilize and strengthen the mexican economy. bis central bankers ’ speeches

summary of the outlook, let me now take a closer look at the financial positions of u. s. households and businesses. as i will discuss, the favorable financial conditions in both sectors should support a solid increase in household and business expenditures. household financial conditions some commentators have expressed concern about the rapid growth in household debt in recent years. they fear that households have become overextended and will need to rein in their spending to keep their debt burdens under control. my view, however, is considerably more sanguine. although there are pockets of financial stress among households, the sector as a whole appears to be in good shape. certainly, households have taken on quite a bit of debt over the past several years. according to the latest available data, total household debt grew at an annual rate of 10 percent between the end of 1999 and the third quarter of 2003 ; in comparison, after - tax household income increased at a rate of the opinions that i will be expressing are my own and do not necessarily reflect those of my colleagues on the board of governors or federal open market committee. 6 percent. the rapid growth in household debt largely reflects a surge in mortgage borrowing, which has been fueled by historically low mortgage interest rates and strong growth in house prices. despite the heavy borrowing, households have kept the repayment burden of their debt in check. notably, many homeowners have taken advantage of low interest rates to refinance their mortgages, some having done so several times over the past couple of years. survey data suggest that homeowners took out cash in more than one - third of these “ refis, ” often to pay down loans with higher interest rates. the resulting drop in the average interest rate on household debt, combined with the lengthening maturity of this debt, has tempered the repayment obligation from the growing stock of debt. the federal reserve publishes two series that quantify this repayment obligation. the first series, the debt service ratio, measures the required payments on mortgage and consumer debt as a share of after - tax personal income. the second series, the financial obligations ratio, is a broader version of the debt service ratio that includes required household payments on rent, auto leases, homeowners ’ insurance, and property taxes. both ratios rose during the 1990s, and both reached a peak in late 2001. since then, however, they have receded slightly on net from their respective peaks, an indication that households, in the aggregate, have been keeping an eye