conditions. for instance, legislation that increases the budget deficit through tax cuts and spending increases can be expected to generate tailwinds to domestic demand and thus to push up the shorter - run neutral interest rate. heightened risk appetite among investors similarly can be expected to push up the shorter - run neutral rate. conversely, many of the forces that contributed to the financial crisis - - such as fear and uncertainty on the part of businesses and households - can be expected to lower the neutral rate of interest, as can declines in foreign demand for u. s. exports. in many circumstances, monetary policy can help keep the economy on its sustainable path at full employment by adjusting the policy rate to reflect movements in the shorter - run neutral rate. in this context, the appropriate reference for assessing the stance of monetary policy is the gap between the policy rate and the nominal shorter - run neutral rate. so far, i have been focusing on the shorter - run neutral rate of interest that is responsive to headwinds or tailwinds to demand. the longer - run equilibrium rate is a related concept. the underlying concept of the “ longer run ” generally refers to the output growing at its longer - run trend, after transitory forces reflecting headwinds or tailwinds have played out, in an environment of full employment and inflation running at the fomc objective. 4 the natural rate and the neutral rate are closely related concepts whose technical differences matter for economic theory and estimation, but less for the intuitive discussion here. see brainard ( 2015 ). - 3 the longer - run federal funds rate estimated by fomc participants in their summary of economic projections ( sep ) meets the definition of a longer - run equilibrium rate of interest. 5 it is worth highlighting that the longer - run federal funds rate is the only neutral interest rate reported in the fomc projections. but the shorterrun neutral rate, rather than the longer - run federal funds rate, is the relevant benchmark for assessing the near - term path of monetary policy in the presence of headwinds or tailwinds. estimating the neutral rate of interest similar to other equilibrium macroeconomic concepts such as potential gross domestic product ( gdp ) and the natural rate of unemployment, the shorter - and longerrun levels of the neutral rate are not directly observable, so they must be estimated or inferred from the movements of variables that are observed, such as market interest rates, inflation, the unemployment rate, and gdp. 6 in recent years

zhou xiaochuan : development of china ’ s inter - bank market address by dr zhou xiaochuan, governor of the people ’ s bank of china, at the opening ceremony of the shanghai clearing house, shanghai, 28 november 2009. * * * mayor han zheng, distinguished guests, dear colleagues, ladies and gentlemen, good morning. today, we gather here to celebrate the establishment of the shanghai clearing house. this is a milestone in the development of china ’ s inter - bank market. on behalf of the people ’ s bank of china ( pbc ), i ’ d like to extend warm congratulations on the founding of the shanghai clearing house. i also thank the shanghai government and people for your gracious support. as a key component of the financial market system, the inter - bank market is playing an increasingly important role in macroeconomic management, fund allocation, pricing and risk management. the people ’ s bank of china is committed to developing the inter - bank market. over the past few years, efforts have been made to enhance financial innovation, improve the market - based mechanism, and expand institutional investors on the market. the inter - bank market has grown in both depth and width. in 2008, the turnover in the inter - bank borrowing market and the inter - bank bond market totaled 114 trillion yuan, an increase of 560 percent from that in 2003. nominal turnover of interest rate derivatives recorded 924. 32 billion yuan, 6. 56 times that in 2006, while nominal turnover of exchange rate derivatives registered us $ 917. 9 billion, 7. 07 times that in 2006. transactions on the inter - bank foreign exchange market also multiplied. the rapidly developing inter - bank market needs more efficient and secure clearing services. in june, the pbc launched the net value clearing service for spot over - the - counter ( otc ) transactions in the inter - bank foreign exchange market, which effectively reduced bilateral credit sizes and lowered clearing costs. the centralized clearing of otc transactions is an international issue. centralized clearing systems for over - the - counter spot trading and derivatives transactions of foreign exchange and interest rate products have been set up in advanced countries and in emerging market countries such as brazil and india. more importantly, following the financial crisis, countries have reached consensus on controlling financial transactions risks. countries agreed that lowering counterparty risk and ensuring effective supervision and regulation are the key to ensure secure and orderly development of the otc derivatives market, which can be best achieved through centralized clearing. in april,