. we will continue to make our decisions meeting by meeting, taking into account the totality of incoming data and their implications for the outlook for economic activity and inflation. although inflation has been moderating in recent months, the process of getting inflation back down to 2 percent has a long way to go and is likely to be bumpy. as i mentioned, the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes. restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time. our overarching focus is using our tools to bring inflation back down to our 2 percent goal and to keep longer - term inflation expectations well anchored. restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run. the historical record cautions strongly against prematurely loosening policy. we will stay the course until the job is done. 2 / 3 bis - central bankers'speeches to conclude, we understand that our actions affect communities, families, and businesses across the country. everything we do is in service to our public mission. we at the federal reserve will do everything we can to achieve our maximum - employment and price - stability goals. thank you. i am happy to take your questions. 1 a box in our latest monetary policy report, " why has the labor force recovery been so slow? " discusses the factors that have been holding back labor supply. 2 a box in our latest monetary policy report, " developments in the federal reserve's balance sheet and money markets, " discusses changes in the size of the federal reserve's balance sheet. 3 / 3 bis - central bankers'speeches

to the consumer without producing any reasonable benefit. these actions were part of the most comprehensive change to credit card regulations ever adopted by the board. similar issues have arisen in the mortgage arena. many of the poor underwriting practices in the subprime market were also potentially unfair and deceptive to consumers. for example, the failure to include an escrow account for homeowners'insurance and property taxes in many cases led borrowers to underestimate the costs of homeownership. in this case, allowing greater optionality – which we usually think of as a benefit – had the adverse effects of increasing complexity and reducing transparency. restricting this practice was one of the new protections in the residential mortgage market that the board established in a comprehensive set of rules released in july. banning or limiting certain underwriting practices, which the new rules do for the entire mortgage market, also helps to address the incentive problems i discussed earlier. for institutions that we supervise, these incentive issues can also be addressed by requiring that lenders set up compensation plans for originators that induce behavior consistent with safety and soundness. where does all this leave us? it seems clear that the difficulty of managing financial innovation in the period leading up to the crisis was underestimated, and not just in the case of consumer lending. for example, complexity and lack of transparency have been a problem for certain innovative products aimed at investors, such as some structured credit products. conclusion i don't think anyone wants to go back to the 1970s. financial innovation has improved access to credit, reduced costs, and increased choice. we should not attempt to impose restrictions on credit providers so onerous that they prevent the development of new products and services in the future. that said, the recent experience has shown some ways in which financial innovation can misfire. regulation should not prevent innovation, rather it should ensure that innovations are sufficiently transparent and understandable to allow consumer choice to drive good market outcomes. we should be wary of complexity whose principal effect is to make the product or service more difficult to understand by its intended audience. other questions about proposed innovations should be raised : for instance, how will the innovative product or practice perform under stressed financial conditions? what effects will the innovation have on the ability and willingness of the lender to make loans that are well underwritten and serve the needs of the borrower? these questions about innovation are relevant for safety - andsoundness supervision as well as for consumer protection. in sum, the challenge faced