coming months. the new tool is a fixed - rate, full - allotment overnight reverse repo facility that would be available to a broad range of counterparties – not just open to the primary dealers through which we have historically conducted our open market operations. 5 by being available to a much broader array of counterparties, this should allow the fed to tighten its control over money market rates. i ’ ll first explain in plain english what this facility is. then i ’ ll explain why we are testing it and what having such a facility in place might accomplish. a fixed - rate, full allotment overnight reverse repo facility is a facility in which the federal reserve posts a fixed interest rate and accepts cash from counterparties, which include banks, dealers, money market funds, and some government sponsored enterprises ( gses ), the desk has been conducting operational readiness exercises for the use of reverse repurchase agreements since late 2009. at the most recent fomc meeting last week, the fomc authorized the desk to begin another testing program which begins today. see the desk ’ s september 20 announcement of the next round of testing. bis central bankers ’ speeches on an overnight basis in return for a security. if implemented, the facility would be “ full allotment ” – that means the facility would have no cap on the amount of funds accepted from any of its counterparties at the posted overnight interest rate. 6 the repo facility is “ reverse ” because the direction in which the funds and securities move – participants are lending funds to the fed rather than vice versa. users of the facility are making the economic equivalent of an overnight collateralized loan of cash to the federal reserve. the amount of funds invested in the facility is likely to be sensitive to the posted interest rate. the higher the interest rate relative to comparable money market rates, the greater the participation is likely to be and vice versa. there are several reasons motivating our interest in developing such a facility. first, such a facility should enable the federal reserve to improve its control over the level of money market rates. by offering a new, essentially risk - free investment, one would expect that anyone with access to such a facility would generally be unwilling to lend instead to someone else at a rate below that posted for the facility. this should help to establish a floor on the level of overnight rates. right now, most short - term rates trade between 0 and 25 basis points, but occasionally t - bill and repo

time lows. these low rates aren ’ t just a fluke of how unemployment is measured in the official statistics — the broadest measure of underemployment, called u - 6, is at its lowest level since 2000. these are all very positive signs when it comes to assessing our maximum employment goal. the economy is in a good place, but not without risk and uncertainty ( there, i said it! ). persistently low inflation is a key area of my attention, with the core pce inflation rate — which strips out volatile food and energy prices — running at 1. 6 percent, nearly half a percentage point below our 2 percent longer - run target. 1 / 3 bis central bankers'speeches on its own, inflation somewhat below our longer - run goal would not be such a big deal, especially with our economy strong. but the broader context is important. ongoing disinflationary pressures from abroad, and the risk that inflation expectations in the u. s. may have drifted down after many years of inflation running below 2 percent, form an important part of this picture. if we look beyond the headline gdp figure, which remains good, there are more mixed signals coming from different sectors. robust consumer spending is balanced by signs of slowing business investment. we ’ ve also seen a decline in exports and weakening manufacturing data, reflecting slowing global growth and uncertainty related to trade and geopolitical risks. i am carefully monitoring this nuanced picture and remain vigilant to act as appropriate to support continuing growth, a strong labor market, and a sustained return to 2 percent inflation. monetary policy adjustments this brings me to our decision to lower the federal funds rate in july and how that fits into recent history. cast your minds back to a year ago, when the fed was continuing along the path of normalizing monetary policy. this context provides useful information for how and why our stance has evolved over time. during the summer of 2018, the economy was growing above trend as businesses rode the wave of fiscal stimulus. the unemployment rate had fallen below 4 percent, a figure not seen since the peak of the tech boom in 2000. the global outlook was still quite positive, and inflation was close to our 2 percent goal. against that backdrop, very gradually bringing interest rates back to more normal levels was appropriate in order to keep the economy on a sustainable path of growth. but the economic outlook and the uncertainty around that outlook have evolved considerably since then. while there ’ s not been