for the u. s. economy is reasonably good, there is considerable work to do over the longer term to improve our nation ’ s productive capacity and foster an environment in which the gains are spread more evenly. monetary policy is limited in what it can do to address these broader structural issues. however, monetary policy will do its part to ensure the macroeconomic and financial stability that can help in achieving progress in these areas. moreover, even with respect to macroeconomic stability, monetary policy could use an assist from fiscal policy. it is important that monetary policy and fiscal policy work together and not at cross purposes to be able to bolster the economy when it needs support. thank you for your kind attention. i would be happy to take a few questions. 1 see new york city ’ s return from the brink, remarks at the lotos club, october 19, 2016. 2 raj chetty, nathaniel hendren, patrick kline and emmanuel saez. “ where is the land of opportunity? the geography of intergenerational mobility in the united states. ” quarterly journal of economics, vol. 129, no. 4, 2014. 6 / 6 bis central bankers'speeches

term interest rates. following this year ’ s election, we have seen relatively large movements in financial asset prices. 2 / 6 bis central bankers'speeches in particular, the stock market has firmed, bond yields have risen and the dollar has appreciated. on balance, it appears that financial market conditions have tightened modestly. my personal interpretation of these developments is that market participants now anticipate that fiscal policy will turn more expansionary and that the fomc will likely respond by tightening monetary policy a bit more quickly than previously anticipated. assuming this expectation is realized, the recent modest tightening in financial market conditions seems broadly appropriate. let me emphasize here that i do not view the recent shift in financial market conditions as one that should prompt great concern. it is important to distinguish between a tightening of financial conditions that is driven by an increase in risk aversion from one that is driven by a greater likelihood of stronger near - term aggregate demand and less downside risk to the growth outlook. we experienced the former at the beginning of 2016, while the latter reflects current expectations of greater fiscal policy stimulus. obviously, there is still considerable uncertainty about how fiscal policy will evolve over the next few years. at this juncture, it is premature to reach firm conclusions about what will likely occur. as we get greater clarity over the coming year, i will update my assessment of the economic outlook and, with that, my views about the appropriate stance of monetary policy. monetary and fiscal policy in a low - rate environment i also would like to highlight the limitations of monetary policy. one important factor contributing to such limits is that the real short - term interest rate consistent over the longer run with a neutral monetary policy stance appears to be very low, and is expected to remain so for some time. this has been helping to keep real inflation - adjusted interest rates lower than they have been historically. in part, this reflects anemic productivity growth as well as the slowing of labor force growth due to the aging of the population. an implication of this environment is that there will likely be less scope than there has been historically for the federal reserve to cut interest rates when needed in the face of an economic downturn. all else equal, this means a greater risk for short - term interest rates to be pinned at their effective lower bound and for inflation expectations to become unanchored to the downside. although forward guidance and large scale asset purchase programs have expanded the ways in which the federal reserve can provide additional accommodation, these unconventional