the broader issue of stock price bubbles. if a change in margin requirements were taken by investors as a signal that the central bank would soon tighten monetary policy enough to burst a bubble, then there might be the appearance of a causal effect. but it is the prospect of monetary policy action, not the margin increase, that should be viewed as the trigger. in a similar manner, history tells us that “ jawboning ” asset markets will be ineffective unless backed by action. op. cit. some have argued that, as a consequence of the 1995 - 2000 speculative episode, long - term imbalances remain, having been only partly addressed since early 2001, the peak of the post - bubble business cycle. for example, large residues of household and external debt are perceived as barriers to future growth. but in the past, imbalances that led to business contractions were rarely fully reversed before the subsequent economic upturn began. presumably they were fully reversed in later periods, or they continued to fester, but not by enough to halt economic growth. even if imbalances still persist in our current environment, the business decline that began in march 2001 came to an end in november of that year, according to the national bureau of economic research. we experienced tepid recovery until the second half of last year, when gdp accelerated considerably. hence, when the next recession arrives, as it inevitably will, it will be a stretch to attribute it to speculative imbalances of many years earlier. risks when possible, and assessing the costs associated with each of the risks. in essence, the risk management approach to monetary policymaking is an application of bayesian decisionmaking. this framework also entails devising, in light of those risks, a strategy for policy directed at maximizing the probabilities of achieving over time our goals of price stability and the maximum sustainable economic growth that we associate with it. in designing strategies to meet our policy objectives, we have drawn on the work of analysts, both inside and outside the fed, who over the past half century have devoted much effort to improving our understanding of the economy and its monetary transmission mechanism. a critical result has been the identification of a relatively small set of key relationships that, taken together, provide a useful approximation of our economy ’ s dynamics. such an approximation underlies the statistical models that we at the federal reserve employ to assess the likely influence of our policy decisions. however, despite extensive efforts to capture and quantify what we perceive as the

from the fourth quarter of bis central bankers ’ speeches 2007 until now, rather than being reduced to its actual target range of 0 to 1 / 4 percent, 1 then the unemployment rate would be several percentage points higher than it is today. in other words, by following our actual policy of keeping the target funds rate at its effective lower bound since late 2008, the federal reserve saved millions of jobs that would otherwise have been lost. of course, substantial uncertainty surrounds various specific estimates, but there should be no doubt that the fomc ’ s forceful actions helped mitigate the consequences of the crisis and thereby spared american families and businesses from even greater pain. unconventional monetary policy actions given the magnitude of the global financial crisis and its aftermath, the federal reserve clearly needed to provide additional monetary accommodation beyond simply keeping shortterm interest rates close to zero. consequently, like a number of other major central banks around the world, the fomc has been deploying unconventional policy tools to promote the economic recovery. in particular, we have provided conditional forward guidance about the likely future path of the federal funds rate, and we have engaged in balance sheet operations that involve changes in the size and composition of our securities holdings. broadly speaking, these policy tools affect the economy through channels that are similar – though not identical – to those of conventional monetary policy. i ’ ll now spend a few minutes describing how each form of unconventional policy can be helpful in promoting a stronger economic recovery. monetary policy communication an essential element of good monetary policy is effective communication. in a democratic society, central banks have the responsibility to clearly and fully explain their policy decisions. good communication is also essential for strengthening the effectiveness of monetary policy. expectations about the future play a key role in the decision - making of households and firms : how much to spend, save, work, invest, or hire. moreover, when financial market participants understand how the central bank is likely to react to incoming information, asset prices can adjust in ways that reinforce the central bank ’ s expected policy actions and thereby support the central bank ’ s objectives. finally, clear communication can help anchor the public ’ s long - term inflation expectations and hence improve the extent to which the central bank can take forceful actions to promote job creation in a context of price stability. with the federal funds rate constrained by its effective lower bound, effective communications with the public have become more important than ever. since 2009, the federal reserve has published the committee participants ’ longer - run projections of the inflation rate,