to boost purchasing power and be an important factor supporting a recovery in demand growth over coming quarters. economic projections the members of the board of governors and the reserve bank presidents foresee an implicit strengthening of activity after the current rebalancing is over, although the central tendency of their individual forecasts for real gdp still shows a substantial slowdown, on balance, for the year as a whole. the central tendency for real gdp growth over the four quarters of this year is 2 to 2 - 1 / 2 percent. because this average pace is below the rise in the economy's potential, they see the unemployment rate increasing to about 4 - 1 / 2 percent by the fourth quarter of this year. the central tendency of their forecasts for inflation, as measured by the prices for personal consumption expenditures, suggests an abatement to 1 - 3 / 4 to 2 - 1 / 4 percent over this year from 2 - 1 / 2 percent over 2000. government debt repayment and the implementation of monetary policy federal budget surpluses have bolstered national saving, providing additional resources for investment and, hence, contributing to the rise in the capital stock and our standards of living. however, the prospective decline in treasury debt outstanding implied by projected federal budget surpluses does pose a challenge to the implementation of monetary policy. the federal reserve has relied almost exclusively on increments to its outright holdings of treasury securities as the " permanent " asset counterpart to the uptrend in currency in circulation, our primary liability. because the market for treasury securities is going to become much less deep and liquid if outstanding supplies shrink as projected, we will have to turn to acceptable substitutes. last year the federal reserve system initiated a study of alternative approaches to managing our portfolio. at its late january meeting, the fomc discussed this issue at length, and it is taking several steps to help better position the federal reserve to address the alternatives. first, as announced on january 31, the committee extended the temporary authority, in effect since late august 1999, for the trading desk at the federal reserve bank of new york to conduct repurchase agreements in mortgagebacked securities guaranteed by the agencies as well as in treasuries and direct agency debt. thus, for the time being, the desk will continue to rely on the same types of temporary open market operations in use for the past year and a half to offset transitory factors affecting reserve availability. second, the fomc is examining the possibility of beginning to acquire under

##spense with research and to have teachers who do not do research. after all, such teachers do not need ph. ds, and there should be many more available. yet it does appear that students prefer degrees from research universities in the united states to those from teaching colleges, even for their undergraduate degrees where students do little research. let me conjecture why. it is not that research professors know more about the basic material that has to be taught – their research is often specialized in a narrow area. neither does research necessarily make you a good teacher – understanding the material at a deeper level may sometimes make it more difficult to explain. i do think, however, that good research requires curiosity. almost all researchers remain curious through their lives, and constantly update their teaching material to reflect developments in the field. i would conjecture, though i have no proof, this is why teaching at research universities is, on average, preferred to teaching at teaching colleges – you are taught more up - to - date challenging material in the former. the bottom line is that education at high quality research universities will remain expensive for a while, certainly till we learn to combine technology and people better. given the need to broaden access to all the deserving, we have to make degrees affordable. one part of the solution is student loans, but we have to be careful that student loans are repaid in full by those who have the means, while they are forgiven in part for those who fall on bad times, or those who take low paying public service jobs. we also should make sure that unscrupulous schools do not prey on uninformed students, leaving them with high debt and useless degrees. a second part of the solution is philanthropy, not just by the founders, but by the successful students from a university. giving back to the university is a way of subsidizing the costs of future generations acknowledging the subsidies you received from the founders when you got your degree. i hope we develop a strong culture of alumni giving in india. you have been very patient in listening to me. let me conclude. india is changing, in many ways for the better. you will be able to help shape our country, the world, and your place in it. by all means set yourself ambitious goals. but remember that, as both ancient indian philosophers and modern day behavioural psychologists say, the achievement of narrow personal goals – greater wealth, rapid promotion, or increasing renown – rarely brings you anything other than brief pleasure.