modal outlook appears to have softened a bit, and risks appear more weighted to the downside than the upside, the best way to safeguard the gains we have made on jobs and inflation is to navigate cautiously on rates. risk management in an environment of a low long - run neutral rate and an attenuated relationship between resource utilization and overall inflation supports this approach. watchful waiting will allow us to gather more information about domestic momentum and foreign growth as well as some of the policy risks weighing on sentiment. balance sheet normalization let me turn now to the second tool used by the federal reserve in recent years - asset purchases. recall that, after reducing the federal funds rate to its effective lower bound of zero in the 2008 - 09 recession, the fomc sought a mechanism for providing additional stimulus in order to achieve maximum employment and target inflation. 13 the federal reserve purchased longer - term treasury securities in an effort to push down longer - term interest rates to support economic activity, an approach sometimes referred to as quantitative easing. it also purchased agency mortgage - backed securities for the same reason, as well as to provide support to the housing sector, which was at the heart of the crisis. although the empirical estimates vary, most conclude that the asset purchase programs were successful in supporting the recovery. 14 once recoveries become well established, the federal reserve moves its policy settings to more normal levels. our current extended recovery is no exception : the federal reserve first started moving the federal funds rate to more normal values once some foreign central banks have reduced their short - term policy rates below zero. see ball and others ( 2016 ) for a discussion of the advantages and disadvantages of such a policy. see the evidence cited in ball and others ( 2016 ). - 10 the expansion was well established, and then it started normalizing the balance sheet once normalization of the federal funds rate was well under way. of course, the benchmark for normalization has changed since before the financial crisis. demand has grown for the fed ’ s liabilities from a variety of sources. the demand for u. s. currency has grown notably relative to nominal gdp, the treasury department now holds large balances in its account at the fed as an important part of its cash management, and foreign central banks hold larger deposits than in the past. in addition, the demand from commercial banks for deposits at the fed - - that is, “ reserves ” - appears to have increased substantially. spurred by new liquidity regulations and their own internal

mohammed laksaci : impact of the oil price decline on the algerian banking system keynote address by mr mohammed laksaci, governor of the bank of algeria, at a meeting with bank executives, algiers, 26 april 2016. * * * i would first like to point out that in terms of external shocks, the algerian economy, which is closely linked to hydrocarbon sector resources, has particularly suffered from the shock inherent to the sharp and sustained fall in world oil prices. it is therefore from this perspective that i start my presentation. i shall talk first of the macroeconomic implications of this external shock, before outlining its impacts from the perspective of financial stability, in light of the new challenges for the banking system in the financing of non - hydrocarbon growth. 1. macro - economic stance economic and financial performance during 2001 - 2008, particularly the significantly improved external financial position and a substantial accumulation of budget savings, enabled the algerian economy to demonstrate resilience in the face of the severe external shock in 2009 inherent to the intensification of the international economic and financial crisis. following the strengthening of the external financial position over 2010 - 2013, algeria continued to preserve monetary and financial stability during 2014, in a context of persistent fiscal deficit and a return to a balance of payments deficit. the impact of the oil price decline on the algerian economy can be examined through the main recent economic and financial developments. first, following the sharp decline of hydrocarbon prices in 2014, the large contraction of hydrocarbon exports in 2015, in a context of still high imports after the significant increase of imports of goods over the period 2007 - 2014, resulted in a high external current account deficit ( - 16. 4 percent of gdp ). with hydrocarbons remaining algeria ’ s main export, the external shock resulted in a significant contraction in international reserves, from us $ billion 179 in 2014 to us $ billion 144 in 2015. nonetheless, this level remains comfortable, representing 27 months of imports of goods and services, in a situation of historically low medium and long term external debt ( 1. 8 percent of gdp ) and the absence of any external indebtedness of the hydrocarbon sector for more than a decade. second, the exchange rate of the dinar vis - a - vis the us dollar depreciated by 20 percent in 2015, while it depreciated by only 3. 8 percent vis - a - vis the euro. in view of the large depreciation of algeria ’ s main