charles i plosser : economic outlook and communicating monetary policy speech by mr charles i plosser, president and chief executive officer of the federal reserve bank of philadelphia, at the 2012 economic forecast breakfast and annual meeting of the main line chamber of commerce and the main line chamber foundation, gladwyne, pennsylvania, 1 february 2012. * * * introduction good morning and thank you for inviting me to participate in the 2012 economic forecast breakfast. we are in that season when traditionally we reflect upon the past year and look ahead. so in the spirit of the season, i will give you my take on the economic outlook. then i want to spend the remainder of my time discussing recent steps taken by the fomc to enhance the way we communicate about monetary policy. before i begin, though, i should note that one of the strengths of the federal reserve system and its federal open market committee is that it brings together a wide range of independent assessments of economic conditions and perspectives on policy. as that famous american journalist walter lippmann once said : “ where all men think alike, no one thinks very much. ” so let me assure you that there is a lot of thinking going on among policymakers at the fed, but my views are my own and not necessarily those of the federal reserve board or my colleagues on the federal open market committee. economic outlook let me start with some general comments on the state of the economy as we enter 2012. a year ago, most economists were forecasting that economic growth would be 3 percent or a bit more in 2011. instead, the latest numbers released last friday showed that real gdp in 2011 was 1. 6 percent, compared to 3. 1 percent in the prior year. some of this weakness is perfectly understandable, given the shocks we experienced throughout most of the year. last year began with severe snowstorms in the east. as 2011 progressed, there were the earthquake and ensuing disasters in japan, followed by the unrest in the middle east and north africa, which led to a run - up in oil prices. in addition, there were renewed concerns about european sovereign debt and the midsummer uproar in washington over fiscal policy and the debt ceiling. all of these events weighed heavily on growth, as well as on business and consumer confidence. yet, the economy persevered. indeed, growth accelerated across each of the four quarters, from less than 0. 5 percent in the first quarter to around 2 – 3 / 4 percent in the fourth quarter.

speeches regulators and policy makers must, in tandem, continue to strengthen resilience and address any emerging vulnerabilities. there are two areas i would identify in this regard. firstly, as the financial stability board has signalled in their recent g20 letter, a major focus of the fsb's policy work next year will be to address financial stability risks associated with non - bank leverage. as you know, over the last 12 months, the focus of both the fsb and iosco has been on investment fund liquidity, with both consulting on updates to the international regulatory framework. that international liquidity work is reaching conclusion. however, national policy makers will need to consider how to implement the outputs from that work. therefore, unsurprisingly, the topics of liquidity and leverage will remain a focus in europe and at the central bank of ireland. in particular, there is continued work underway looking at liability driven investment funds ( ldi ) funds with a view to preventing a repeat of the issues we saw last year, one of the first times that leverage played such a significant role in a market event. as part of our ongoing policy work to safeguard resilience, last week we published a consultation paper on measures to enhance the steady state resilience of irish authorised sterling denominated ldi funds. given the cross - border nature of these funds, we have sought to ensure international coordination in codifying these measures, as exemplified by the fact that the commission de surveillance du secteur financier ( cssf ) in luxembourg is also publishing a similar consultation paper on ldi funds in parallel to our work. this coordination is important to ensure the effectiveness of these measures. the second area i would highlight in terms of potential vulnerabilities, relates to sustainable finance disclosures. funds managers, and other participants in europe capital markets, have an important role to play in supporting the transition to a more sustainable economy. the challenge climate change represents has become even clearer over the last number of months. financial markets have a critical role to play and, in many ways, the financial sector is to the fore of the risks and opportunities these changes present. as a result, an ambitious sustainable finance agenda has been embarked on in the european union. we have moved from a framework devoid of sustainable disclosure requirements, to a rapidly advancing legislative and regulatory landscape. as a result, this area is forming an increasingly large part of our current work programme, both at esma and at the