risk areas, such as randall s. kroszner ( 2007 ), " recent events in financial markets, " speech delivered at the institute of international bankers annual breakfast dialogue, washington, october 22. randall s. kroszner ( 2008 ), " improving risk management in light of recent market events, " speech delivered at the global association of risk management professionals annual risk convention, new york, february 25. by embedding market - liquidity premia or applying market - liquidity haircuts in pricing models and valuations, or by adjusting assumed holding periods – all of which would increase capital attributions in market or credit risk. as for funding - liquidity risk, it is not clear that banks have been able to establish a clear link between funding - liquidity parameters and robust capital attributions ; however, through testing and scenario analysis – exercises that capture both bank - specific problems and broader market disruptions – banks should still be able to assess the impact that problems in funding - liquidity risk can have on capital adequacy. international supervisory response international banking regulators are working together on several fronts to respond to recent liquidity challenges, and i would like to summarize these efforts before closing my remarks. first, supervisors are collaborating to understand the causes of the recent turbulence and to identify steps to mitigate future problems. through the basel committee on banking supervision, supervisors are reviewing liquidity - risk - management practices worldwide. just last week the committee issued a public report that builds on the basel sound practices for managing liquidity risk issued in 2000. 6 among other things, this report highlighted the need for stress testing to evaluate the risks of marketwide disruptions, as well as the importance of coordination between institutions'treasury functions and business lines to ensure a full appreciation of potential contingent liquidity risks. the committee plans to issue enhanced sound practices for public comment in the summer of 2008. another example of international collaboration among supervisors is an interim report by the financial stability forum ( fsf ) working group on market & institutional resilience, published last month. 7 this report gives some broad policy directions for strengthening the resilience of key elements of the financial system, such as encouraging banks to maintain more robust liquidity buffers and develop better contingency funding plans. the group intends to develop specific recommendations in its full report, which is due for publication later this spring. second, as i noted, there are linkages between liquidity and capital

term inflation expectations appear to remain well anchored, consistent with our 2 percent target. i will be watching those expectations closely. an important outcome of the shifts you have been discussing, from firms'production patterns and distribution mechanisms to consumers'purchasing decisions, is that inflation dynamics likely changed also. how and why prices change require careful study and analysis, and a data - driven approach is more essential than ever. restoring price stability may take some time and will likely entail a period of below - trend growth. however, i want to assure you that my colleagues and i are resolute that we will bring inflation back down to 2 percent. the full effects of monetary policy take time, but in my brief time on the federal open market committee, we have acted boldly to address rising inflation, and we are committed to taking the further steps necessary. implications for policy approaches the fundamental shifts at the core of the economy shape my approach to policy. as we are assessing the dynamics of the macroeconomy amid rapid changes, we will be watching the data closely and applying rigorous analysis. my focus is on progress toward our goal. it is too soon to say whether the pandemic and the changes it brought - many of which this conference has covered - are going to be permanent or ebb as time goes by. my guess is that it is likely to be a combination of the two, with some features becoming 3 / 4 bis - embedded, such as new approaches to working and contactless payments, and others returning to something like they were before, like the preference for in - person education. either way, it will take time for these changes to prove themselves to be either permanent fixtures or temporary features. research will play a key role as we try to answer important questions. new data will help us analyze the changes to the economy, and research will assemble the pieces of the puzzle that show the bigger picture. as we watch and assess developments in the u. s. economy, we will have to take into consideration a multitude of factors, including those rooted in technology - enabled disruption, and the strength and the staying power of the many forces that are shaping the economy. thank you for your time, and i look forward to your questions. 4 / 4 bis -