institutions, to the financial utilities, and to the regulators and supervisors. addressing operational risk requires, at a minimum, stronger and deeper operational back - ups - - including systems and telecommunications - - at individual firms and their service providers. conclusions in closing, i think it useful to revisit one of the main issues i have raised today - - whether a firm ’ s risk - management decisions should be informed by formal risk modeling. clearly, either with or without formal modeling, a firm will always respond to a change in perceived risk. formal risk models provide a systematic and disciplined way for firms to measure changes in the riskiness of their portfolios, and they provide a framework to help firms develop strategies to manage changes in their risk. put differently, formal models are tools that help provide information to firms so that they can better think about what they are doing. in using this tool, practitioners must never lose sight of the fact that models need continued care and feeding to keep them in line with the latest knowledge, and parameters need to be set with due regard for low - probability events that may not be adequately addressed in recent data. practitioners need to keep in mind that rare events implicit in the tails of distributions will occasionally occur. the critics don ’ t seem to mention perhaps the biggest risk of the increasing importance of models : the lulling of the users into a false sense of well - being that loses sight of these potential tail events. i find, on balance, recent advances in the formalization of risk measurement and management to be beneficial. i urge financial institutions and market participants to continue to improve these models, and to use empirically based quantitative risk - management models as one of many techniques used to choose and manage risk. these models should not replace, but rather supplement, judgment and experience. judgment and experience informed by empirical support should, over the long - run, be superior to judgment uninformed by modern technology.

continue to restrain inflationary pressures. given these conditions, inflation is expected to remain at or slightly below the 2 percent rate that the federal open market committee ( fomc ) judges consistent with our statutory mandate to foster maximum employment and stable prices. with unemployment still quite high and the outlook for inflation subdued, and in the presence of significant downside risks to the outlook posed by strains in global financial markets, the bis central bankers ’ speeches fomc has continued to maintain a highly accommodative stance of monetary policy. the target range for the federal funds rate remains at 0 to 1 / 4 percent, and the committee has indicated in its recent statements that it anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate at least through late 2014. in addition, the federal reserve has been conducting a program, announced last september, to lengthen the average maturity of its securities holdings by purchasing $ 400 billion of longer - term treasury securities and selling an equal amount of shorter - term treasury securities. the committee also continues to reinvest principal received from its holdings of agency debt and agency mortgage - backed securities ( mbs ) in agency mbs and to roll over its maturing treasury holdings at auction. these policies have supported the economic recovery by putting downward pressure on longer - term interest rates, including mortgage rates, and by making broader financial conditions more accommodative. the committee reviews the size and composition of its securities holdings regularly and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability. the economy ’ s performance over the medium and longer term also will depend importantly on the course of fiscal policy. fiscal policymakers confront daunting challenges. as they do so, they should keep three objectives in mind. first, to promote economic growth and stability, the federal budget must be put on a sustainable long - run path. the federal budget deficit, which averaged about 9 percent of gdp during the past three fiscal years, is likely to narrow in coming years as the economic recovery leads to higher tax revenues and lower income support payments. nevertheless, the congressional budget office ( cbo ) projects that, if current policies continue, the budget deficit would be close to 5 percent of gdp in 2017 when the economy is expected to be near full employment. 3 moreover, under current policies and reasonable economic assumptions, the cbo projects that the structural budget gap and the ratio of federal debt to gdp will trend upward