all its rulemaking responsibilities, the federal reserve is attentive to aligning the rules required by the dodd - frank act with international agreements, such as higher capital standards and new liquidity standards for large banks and capital surcharges for the largest global sifis. the federal reserve, working with other financial regulators, has issued a number of proposed and final rules relating to such areas as the centralized clearing of derivatives, swap margin requirements, and the designation of systemically important fmus and nonbank financial firms. the proposed rule for designating nonbank financial firms was put out for comment in october. 1 this rule specifies a process for designating such institutions, starting by analyzing firms that exceed a size threshold and exhibit characteristics, including excessive leverage and reliance on short - term funding, that could contribute to systemic risk if the firm were to become distressed. less - discernible progress has been made to date, however, in addressing other key vulnerabilities that came to the fore during the financial crisis. indeed, short - term funding markets remain an important source of structural risk. despite some significant reforms that enhance liquidity and impose additional restrictions on portfolios, money market funds are still susceptible to liquidity constraints largely because of attributes like their rounded net asset value ( nav ) feature and the low risk tolerance of their investors. options for further reforms being considered by the securities and exchange commission ( sec ) include a mandatory floating nav to mute the incentive for investors to be the first to redeem, capital buffers to allow funds to deal better with actual and potential losses while sustaining a stable nav, and limits on redemptions both to provide more time for fund managers to address problems and to emphasize to investors that money market funds do not guarantee bank - like liquidity. 2 the triparty repurchase agreement ( repo ) market also continues to exhibit important vulnerabilities. in particular, the settlement process for triparty repo trades continues to rely on massive amounts of intraday credit and, as a result, remains vulnerable to a decision by a clearing bank to withhold funding from a market participant in default or perceived as facing distress. the fsoc has recommended reforms to deal with these problems, and an industry task force has taken some key initial steps in that direction – for example, by coordinating the implementation of a robust confirmation process for triparty trades. but more needs to be done. indeed, given the centrality of this market to the financial

of price stability. indeed, guaranteeing a smooth functioning of financial markets and assessing the implications of our decisions on financial conditions with great care are necessary conditions for delivering on our medium - term price stability mandate. our decisions remain intertwined with those of the fiscal authorities. as i mentioned, a supply - side shock should be tackled predominantly by fiscal policy which could shield the economy by diminishing the transmission of price increases from energy to consumer goods and limiting the loss in disposable income. the de facto coordination between fiscal and monetary policy, which has worked well in the last two years to counteract and contain the economic and financial consequences of the pandemic crisis, is still necessary today. i believe that if fiscal policy is effective in attenuating the impact on households and businesses of the incredible leap in energy prices and if monetary policy proceeds with caution, absent the second - round effects that i already mentioned, we will be able to successfully continue the gradual normalisation of our monetary policy stance started at the end of last year. this said, fiscal policies should remain focused on increasing growth potential, while preserving the good health of public balances, two closely interconnected objectives. the relevance of the former is magnified by the challenges that will characterise the next decade, including the inevitable normalisation of the growth rate of the economy and of short - and long - term interest rates as well as the ageing of the population. regarding the second objective, countries with high public debt will have to progressively improve their primary balance. of course, an immediate end to the russian aggression in ukraine could quickly put an end to the escalation of energy prices, bringing inflation down and helping us to put the economy back on a growth path. in expressing solidarity with the ukrainian people, i believe i speak for everyone when i say that peace is the result we all hope for. figures figure 1 real disposable income and gdp ( annual data ; percentage changes ) united states euro area source : us bureau of economic analysis and eurostat ( real disposable income for the euro area in 2021 is estimated ). figure 2 demand in the goods and service sectors a. united states ( monthly data ; indices : jan. 2020 = 100 ) goods sector service sector jan - 2019 jan - 2020 jan - 2021 jan - 2019 jan - 2022 jan - 2020 jan - 2021 jan - 2022 b. euro area ( quarterly data ; indices : 2019q4 = 100 ) goods sector service sector