example. it is more difficult to point to episodes when the absence of formal arrangements for coordination of supervisory actions inhibited a response to a problem. conversely, might arrangements that are too formal, too rigid, or too cumbersome themselves inhibit appropriate responses in emergency situations, each of which is likely to be unique? another question is whether supervisory authorities have the expertise and resources to provide meaningful oversight and develop accurate assessments of the risk - taking activities of large, diversified, globally active financial institutions. if the answer is no, as might well be the case, should we nevertheless convey to market participants the sense that we are in fact adequately supervising such activities? wouldn ’ t that reduce the incentives for market participants themselves to provide discipline? would a statement that all major financial firms, even the most diversified ones, are subject to coordinated supervision suggest a degree of support that effectively extends, to an unwarranted extent, the subsidy associated with national safety nets? would it generate a degree of moral hazard that could itself be the source of systemic risk? the answers to these questions are not straightforward. however, while many firms should reassess and upgrade their risk management procedures, and supervisors should improve their procedures as well, i do not believe that the need for a radical change in our framework for the supervision of internationally active financial firms has been demonstrated. the paradigm of supervision itself is, of necessity, continuously adjusted to the rapidly changing, technologically driven financial system. in recent years, firms and supervisors alike have sought to harness technological advances to enhance risk management procedures. much thought has been given to how to make public disclosure more meaningful and to reinforce market discipline. supervisors around the world, not just in the major industrial countries, have gotten to know each other better and to understand better each others ’ problems and policies. the legal and institutional infrastructure of financial markets has been significantly improved. along with good macroeconomic policy - - a topic for another day - - a continuation of this ongoing process of careful and measured progress represents the most constructive strategy for ensuring financial stability.

same is true of estimates of the neutral interest rate. we therefore refer to many indicators when judging the degree of slack in the economy or the degree of accommodation in the current policy stance. we are also aware that, over time, inflation has become much less responsive to changes in resource utilization. while inflation has recently moved up near 2 percent, we have seen no clear sign of an acceleration above 2 percent, and there does not seem to be an elevated risk of overheating. this is good news, and we believe that this good news results in part from the ongoing normalization process, which has moved the stance of policy gradually - 14 closer to the fomc ’ s rough assessment of neutral as the expansion has continued. as the most recent fomc statement indicates, if the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate. the economy is strong. inflation is near our 2 percent objective, and most people who want a job are finding one. my colleagues and i are carefully monitoring incoming data, and we are setting policy to do what monetary policy can do to support continued growth, a strong labor market, and inflation near 2 percent. - 15 references bernanke, ben s. ( 2007 ). “ inflation expectations and inflation forecasting, ” speech delivered at the monetary economics workshop of the national bureau of economic research summer institute, cambridge, mass., july 10, https : / / www. federalreserve. gov / newsevents / speech / bernanke20070710a. htm. blinder, alan s., and ricardo reis ( 2005 ). “ understanding the greenspan standard, ” paper presented at “ the greenspan era : lessons for the future, ” a symposium sponsored by the federal reserve bank of kansas city, held in jackson hole, wyo., august 25 - 27, https : / / www. kansascityfed. org / publicat / sympos / 2005 / pdf / blinder - reis2005. pdf. blinder, alan s., and janet l. yellen ( 2001 ). the fabulous decade : macroeconomic lessons from the 1990s. new york : century foundation press. board of governors of the federal reserve system ( various years ). bluebook ( monetary policy alternatives ). washington : board of governors, june 1996 - december 1998, https : / / www. federalreserve.