of energy, and the drag on domestic production from the excess of imports over exports all represent forces pulling the equilibrium real federal funds rate below its perceived longer - term level. and, in the context of well - contained inflation, the evidence of remaining underused resources gives us a good reason to hold the real rate below even the intermediate - run notion of its equilibrium to allow the economy to be firmly set on a path that will shrink the pool of these underused resources over a reasonable period. but as the expansion regains its footing and resource slack is worked down, we should expect both that the equilibrium real rate will move toward its longer - run level and that policymakers will no longer find it appropriate to keep the actual rate below its equilibrium. that is, the fomc will likely be removing its policy accommodation over time. the pace of return to equilibrium i have thus far argued that the equilibrium rate that is relevant for actual policy determination can only be judged in the context of forces influencing economic developments. several aspects of the current outlook lead me to suspect that the return of the equilibrium real rate from its currently somewhat depressed level to its long - run value might plausibly be expected to be gradual and attenuated compared with historical experience. let me highlight just three of these aspects. i have already mentioned the role of business hesitancy in determining the past trajectory of monetary policy. clearly, if evidence of that hesitancy remains - for example, if the labor market were to remain sluggish - that might be one indication that the return of the equilibrium rate to its longer - run level is likely to be relatively gradual. secondly, the household saving rate has fallen to less than 1 percent, quite low in its range of historical variation. if households, on net, take steps to return the saving rate closer to the middle of that range ( which, i might add, would provide welcome support to capital accumulation ), then a sustained period in which consumption grows more slowly than income would result. third, given government budgetary trends, some fiscal restraint is in order, and one might expect that those responsible for fiscal policy will move that policy to a more - balanced position ( another development i would welcome ), thereby removing some fiscal impetus. i believe that the combined force of these three factors restraining aggregate demand, plus others that i have not mentioned, would require a lower real rate than otherwise to avoid economic slack. let me add, however, that there is a powerful force tending to

1996 and should be addressed by the congress. the congress did intend that the fdic impose risk - based premiums, but the 1996 act limits the ability of the fdic to impose risk - based premiums on well - capitalized and highly rated banks and thrift institutions. and these two variables - capital strength and overall examiner rating - do not capture all the risk that institutions could create for the insurer. the board believes that the fdic should be free to establish risk categories on the basis of any economic variables shown to be related to an institution's risk of failure, and to impose premiums commensurate with that risk. although a robust risk - based premium system would be technically difficult to design, a closer link between insurance premiums and the risk of individual institutions would reduce moral hazard and the distortions in resource allocation that accompany deposit insurance. we note, however, that although significant benefits from a risk - based premium system are likely to require a substantial range of premiums, the fdic concluded in its report that premiums for the riskiest banks would probably need to be capped in order to avoid inducing failure at these weaker institutions. we believe that capping premiums may end up costing the insurance fund more in the long run should these weak institutions fail anyway, with the delay increasing the ultimate cost of resolution. the board has concluded, therefore, that if a cap on premiums is required, it should be set quite high so that riskbased premiums can be as effective as possible in deterring excessive risk - taking. in that way, we could begin to simulate the deposit insurance pricing that the market would apply and reduce the associated subsidy in deposit insurance. nonetheless, we should not delude ourselves into believing that even a wider range in the risk - based premium structure would eliminate the need for a government back - up to the deposit insurance fund, that is, eliminate the government subsidy in deposit insurance. to eliminate the subsidy in deposit insurance - to make deposit insurance a real insurance system - the fdic average insurance premium would have to be set high enough to cover fully the very small probabilities of very large losses, such as those incurred during the great depression, and thus the perceived costs of systemic risk. in contrast to life or automobile casualty insurance, each individual insured loss in banking is not independent of other losses. banking is subject to systemic risk and is thus subject to a far larger extreme loss in the tail of the probability distributions from which real