##modative stance of policy as appropriate for several reasons. first, with inflation continuing to run below our objective, a mild undershooting of the unemployment rate considered to be normal in the longer run could help move inflation back up to 2 percent more quickly. second, a stronger job market could also support labor market improvement along bis central bankers ’ speeches other dimensions, including greater labor force participation. a third reason relates to the risks associated with the constraint on conventional monetary policy when the federal funds rate is near zero. if inflation were to move persistently above 2 percent or the economy were to become notably overheated, the committee could readily increase the target range for the federal funds rate. however, if inflation were to remain persistently low or the expansion were to falter, the fomc would be able to provide only a limited amount of additional stimulus through conventional means. 15 these motivations notwithstanding, i continue to believe that it will be appropriate to gradually reduce the degree of monetary policy accommodation, provided that labor market conditions strengthen further and inflation continues to make progress toward our 2 percent objective. because monetary policy affects the economy with a lag, steps to withdraw this monetary accommodation ought to be initiated before the fomc ’ s goals are fully reached. and if the headwinds that have lingered since the crisis slowly abate as i anticipate, this would mean that the neutral rate of interest itself will move up, providing further impetus to gradually increase the federal funds rate. but i stress that the economic outlook, including the pace at which the neutral rate may shift over time, is uncertain, so monetary policy cannot proceed on any preset path. 16 this point is well illustrated by events so far this year. for a time in january and early february, financial markets here and abroad became turbulent and financial conditions tightened, reflecting and reinforcing concerns about downside risks to the global economy. in addition, data received during the winter suggested that u. s. growth had weakened even as progress in the labor market remained solid. because the implications of these developments for the economic outlook were unclear, the fomc decided at its january, march, and april meetings that it would be prudent to maintain the existing target range for the federal funds rate. over the past few months, financial conditions have recovered significantly and many of the risks from abroad have diminished, although some risks remain. in addition, consumer spending appears to have rebounded, providing some reassurance that overall

development has been another concern. the rbi ’ s role has included setting up new institutions, encouraging the use of technology, developing markets, and expanding financial inclusion. in the coming year, we will have many new players in the banking eco - system, such as payments banks, small finance banks and possibly a postal bank competing with existing universal banks, regional rural banks, cooperative banks, and a variety of non - bank finance companies. the use of technology has also expanded from the days when accounts were maintained manually in ledgers and unions called for strikes at the very mention of the word computers. today, some banks allow customers to do all their banking transactions on a mobile phone, without entering a branch or touching a pen. the reserve bank ’ s intent is to create an ownership neutral, institution neutral, technology agnostic level competitive arena. for example, technologies enabling touch - and - go payments will find use even as banks focus on acquiring and analysing information and reducing transactions costs as they compete to extend financial services to all. the rbi ’ s state - of - the - art payments system will support technology, even as the rbi strengthens its cyber - supervision and cyber - security. we also need deep markets to absorb risks that stay too often in banks or in corporations. here too our track record has been strong. though many developing country governments bis central bankers ’ speeches are forced to borrow only in foreign currency, the reserve bank has fostered a liquid rupee government bond market, where the government today is able to contemplate issuing 40 year bonds. the rupee is truly becoming international as foreign institutions queue up to issue rupee denominated bonds. new products supported by the rbi, such as the recently introduced interest rate futures contract, are doing a roaring business on exchanges. our tasks are far from over. the nation has enormous financing needs in infrastructure, and far too many of our banks already have too much exposure. big corporate infrastructure players have also taken too much debt. the required national push to finance infrastructure should not override financial stability, which is key to national security. going forward, we need to develop new sources of risk capital so that our infrastructure needs can be financed with moderate amount of debt, even as we help the system deleverage. perhaps the country ’ s most important financial challenge, which is the theme of the conference today, is to bring financial services to every doorstep and to every small enterprise. the poor are still too far away from, or too