the second pillar of interest rate control : liquidity supply. in order for central banks ’ remuneration rates to effectively achieve interest rate control, central banks supply reserves in appropriate quantities to achieve the interest rate target. in some environments, this requires central banks to forecast demand for liabilities and execute open market operations to supply needed reserves. in recent years, the demand for many central bank liabilities has become higher and less predictable. however, most central banks have been operating with abundant liquidity surpluses, which has limited the impact of this reduced predictability on implementation. 12 as central banks embark on balance sheet reduction, however, understanding demand for liabilities may become more important. the demand for digital currencies is not well understood, as these are instruments for which there is no precedent or experience. for a cbdc, central banks would have to understand the behavior of the demand for this new liability. if stablecoins were to be issued by commercial banks, it would also be important to understand drivers of growth in these coins and how that growth might affect banks ’ demand for reserves. trend growth in these central bank liabilities could be quite different than it is for other liabilities, such as cash or reserve holdings of traditional banks. and, the variability in demand could potentially be high, driven by shifts in the market environment or in response to geopolitical developments or other exogenous events. this variability could be amplified if digital currencies were available internationally, potentially leading to larger flows. the variability could create new challenges for supplying the appropriate amount of reserves to the banking system to ensure that administered rates continue to control rates, and could lead to a need for larger liquidity surpluses to ensure interest rate control. one way to manage growth or variability in demand, and the associated impact on demand for reserves in the banking system, could be to impose limits on how much of a cbdc individuals or institutions could hold. some central banks are actively considering such limits. 13 however, these could also diminish the use cases for cbdc and reduce the potential for consumers and businesses to take advantage of the payment benefits. stablecoins may not have the same types of holding limitations, which could lead to faster growth or more variability in demand. at least one jurisdiction is considering the potential use of holding limits or transaction limits on stablecoins on a temporary basis, to manage the possible shift from commercial bank deposits during a transition to new forms of digital money. 14 central banks could

, business closures, and job losses created tremendous hardships for many americans, and was especially devastating for communities of color. we know that people of color, and black people in particular, experienced higher rates of illness and death. 1 significant representation in essential services work — jobs that required close contact with others — contributed in part to these tragic outcomes. 2 over the past 18 months, we learned how these issues played out for families through regular conversations with community leaders in our district and beyond. separately, our research shone a spotlight on many of these painful realities. for example, a team of new york fed economists published a series earlier this year aimed at understanding the gap in covid - 19 intensity by race and by income. 3 and last month, they shared their findings around racial differences in icu stress during the third wave of covid - 19. 4 1 / 2 bis central bankers'speeches there ’ s no single or simple solution that can fully address these problems. but, as a nation we can build a stronger foundation so that everyone can fulfill their economic potential, thus better enabling the federal reserve to fulfill its mandate. that ’ s why at the new york fed — and across the federal reserve system — a key area of focus is to better understand economic drivers of health and wellbeing, and to champion promising solutions. we are able to do this in large part through our community development efforts to better understand the needs and issues of low - and moderate - income communities throughout our district. our community development team recently adopted a new strategy to concentrate on three key areas : health, household income, and climate. 5 our aim is to connect people, programs, and proposals — especially those focused on fostering racial equity — with the funding needed to promote equitable growth and tackle economic inequality. we are already doing important work in this space and there is so much planned for the future. a few months ago, we brought together mental health and policy experts to examine the pandemic ’ s impact on mental health in communities of color, including the correlation between depression, anxiety, and economic factors such as lost income. 6 and next week, we ’ ll be hosting an event in collaboration with new york university ’ s rory meyers college of nursing, the new york city department of health and mental hygiene, the low income investment fund, and the robert wood johnson foundation to discuss the need for investments in maternal and child health. 7 our goal for convening this coalition of thought and civic