. the policy rate increase is intended to prevent a rise in pressures in the economy that would trigger an acceleration in price and wage inflation. a higher interest rate also mitigates the risk of a renewed, rapid rise in property prices and debt. high price and wage inflation and a further build - up of financial imbalances would increase the risk of a sharp economic downturn further out. the plan is to move gradually to a more normal interest rate level. our assessment in march was that capacity utilisation was slightly above a normal level. at the same time, underlying inflation was a little higher than the inflation target of 2 percent. our projections implied that the policy rate would be raised in the course of the next half - year. there were also prospects that the policy rate would rise to 1. 75 percent by the end of 2022. this means that the average residential mortgage rate could increase from 2. 6 percent in march to 3. 5 percent in the course of the same period. we therefore believe that interest rates will not be as high as in previous upturns. with that path for the policy rate, inflation is projected to be close to target in the years ahead, at the same time as unemployment remains low. more persons employed and prospects of higher wage growth will contribute to lifting income. despite higher interest rates, there are prospects that most households will experience an improvement in purchasing power in the coming years. the risk outlook is dominated by global developments. over the past year, rising protectionism and political uncertainty have weighed on global growth. the uk ’ s relations with the eu have yet to be clarified. if trade tensions deepen, growth among trading partners may be lower than we projected in march. the uncertainty surrounding global developments and the effects of monetary policy suggests a cautious approach to interest rate setting. our most recent monetary policy meeting was held yesterday, and we published the decision earlier today. since the publication of our march projections, capacity utilisation appears to be rising as expected, while inflation has been a little higher than projected. global uncertainty persists. at its monetary policy meeting, the executive board decided to keep the policy rate unchanged at 1. 0 percent. the executive board ’ s current assessment of the outlook and balance of risks suggests that the policy rate will most likely be raised in june. our mission is to deliver low and stable inflation, while contributing to high and stable output and employment. should economic developments diverge from our current projections, the policy rate path

think about this goal — as laid out in our financial stability report ( fsr ), which was just released in october — distinguishes between shocks to, and vulnerabilities of, the financial system. 3 importantly, and as we economists know, we cannot predict exogenous shocks, which are, by definition, the surprise events that will hit the financial system and economy. by contrast, vulnerabilities — the aspects of the financial system that would exacerbate stress — tend to build up over time and can be identified, assessed, and monitored. in the example of the global financial crisis, although it was widely recognized that housing valuations were high, the magnitude of the ensuing price drop was unexpected, or a shock. that shock was amplified by vulnerabilities that had built up within the financial system over time, including weak bank capital, excessive household debt, lax lending standards, and fragile short - term wholesale funding. one hard - learned lesson of the crisis is that the fed and see the statement on longer - run goals and monetary policy strategy, which is available on the board ’ s website at https : / / www. federalreserve. gov / monetarypolicy / files / fomc _ longerrungoals. pdf. see board of governors of the federal reserve system ( 2023 ), financial stability report ( washington : board of governors, october ), https : / / www. federalreserve. gov / publications / files / financial - stability - report20231020. pdf. - 3other regulators must watch closely for vulnerabilities that may build up within the financial system. based on this experience, other historical episodes, and academic research, we focus, in the board ’ s fsr and other work, on assessing vulnerabilities across four broad categories related to asset valuations, borrowing by businesses and households, financialsector leverage, and funding risks. we also consider, through contacts with market participants and experts, near - term risks that, if they were to come to pass, could interact with these vulnerabilities. asset valuations one key set of vulnerabilities stems from valuation pressures. the willingness of investors to take on risks is closely related to the economic and financial cycle. when their risk appetite drives prices higher relative to economic fundamentals, there may be a greater risk of outsized drops in prices that can be destabilizing. 4 the fed looks at