for release on delivery 12 : 00 p. m. edt september 26, 2019 government of union : achieving certainty in cross - border finance remarks by randal k. quarles vice chair for supervision board of governors of the federal reserve system chair financial stability board at financial stability board workshop on pre - positioning, ring - fencing, and market fragmentation philadelphia, pennsylvania september 26, 2019 regulatory and supervisory colleagues, members of the financial stability board ’ s ( fsb ) resolution steering group ( resg ) and standing committee on supervisory and regulatory cooperation ( src ), representatives from academia, and the private sector : thank you for being here, and for taking part in today ’ s workshop on prepositioning, ring - fencing, and market fragmentation. i particularly want to thank ryozo himino, our new src chair, for his leadership in highlighting these issues ; his remarks and efforts around market fragmentation are especially timely, as we begin the difficult task of examining the post - crisis reforms. i also want to recognize and thank sir jon cunliffe, for proposing a workshop where we can explore these issues together ; as he recently said, quoting ben franklin, “ we must all hang together, or most assuredly, we shall all hang separately. ” 1 finally, i want to thank the leadership and staff of the federal reserve bank of philadelphia, for not just accommodating us, but making us feel welcome in the nation ’ s first capital. 2 the philadelphia fed is three blocks north, and another three west, from the birthplace of american central banking. that birthplace is not the site of the first or second banks of the united states, whose neoclassical headquarters are still standing and open to the public. 3 instead, the first national bank sat just west of north 3rd street and chestnut : the bank of north america. 4 john bartlett, familiar quotations ( 10th ed., 1919 ), https : / / www. bartleby. com / 100 / 245. 21. html. u. s. senate, “ the nine capitals of the united states ” ( citing robert fortenbaugh, the nine capitals of the united states ( 1948 ), at 9 ), https : / / www. senate. gov / reference / reference _ item / nine _ capitals _ of _ the _ united _ states. htm. national park service, “ first bank of the united states ” ( october 18, 2016 ), https : / / www. np

payroll data. it is interesting that, although central bank talk may have increased sensitivity to certain data releases, overall financial market volatility has declined recently. federal reserve communications policy has likely contributed to the fall in volatility by reducing the uncertainty surrounding the future course of policy. we concentrated on changes in the funds rate that were surprises to financial markets, on the grounds that changes in the funds rate that were fully anticipated would already be priced into markets in advance of the fomc ’ s action. to determine which fomc rate - setting actions were unexpected, as well as the magnitude of the policy surprises, we followed kuttner ( 2001 ) and compared the rate actually set by the fomc at each meeting to the market ’ s expectation of that rate, as inferred from the prices of federal funds futures contracts. applying our methodology, we found that an unexpected 25 - basis - point change in the committees funds rate target has been associated with a change of about 13 basis points, in the same direction, in the expected funds rate one year ahead. as noted in the text, however, most changes in the funds rate are at least partially anticipated, implying that the unexpected component of most funds rate decisions is considerably less than 25 basis points. the effect on year - ahead rate expectations of a typical change in the funds rate is correspondingly reduced, to 5 basis points or less. to determine which statements surprised markets we used a number of sources, including staff commentaries prepared at the board of governors and the federal reserve bank of new york, articles in the wall street journal, pre - meeting commentary by a leading financial firm, and pre - meeting surveys of primary dealers and other market participants. each fomc statement that used the “ considerable period ” language also discussed labor market conditions, and the december 2003 statement tied the “ considerable period ” outlook for policy closely to “ slack ” in resource use. as i observed earlier, much of the potency of monetary policy lies not in the fomc ’ s ability to affect today ’ s federal funds rate but rather in the committee ’ s ability to influence market expectations about future policy and, consequently, the economically more relevant long - term rates. on this important metric, the statement has become an increasingly important tool of policy. of course, as i have already emphasized, talk is of no value if market participants do not believe that the fomc intends to follow through on its plans - adjusting as necessary, of course,