and the economic recovery a second key question involves the concerns about fed actions stoking inflation. this question is not a distinct and separate issue from the one we just discussed – the strength of the recovery. in fact they are crucially related. if housing - related growth is not going to boost the recovery this time around, we may need policy – particularly monetary policy – to continue playing a stimulative role. but it is important to look at possible costs of stimulative policy, as well as benefits. if inflation were to become a problem that would certainly fall in the costs column. but if analysis figures 8 and 9 are based on data from mcdash analytics llc, a subsidiary of lender processing services, inc. the mcdash data contain loan - level data from mortgage servicers, and cover more than half of all outstanding mortgages in the united states. the number of servicers contributing to the mcdash dataset is growing over time, so the decline in purchase loans depicted in figure 8 probably understates the true decline in lending to a small extent. the 2010 distributions reflect data through november 2010. the share of subprime loans in the mcdash data is generally smaller than the true subprime share of u. s. mortgages. to create figure 9, subprime loans in the mcdash data were " upweighted, " so that the adjusted 12 subprime share matches the true subprime share in a benchmark year ( 2006 ). the benchmark figure used for the weighting is based on the top panel of figure 1b in mayer and pence ( 2008 ) : “ subprime mortgages : what, where and to whom? ” finance and economics discussion series paper no. 2008 - 29, board of governors of the federal reserve system – available on the board of governors website at http : / / www. federalreserve. gov / pubs / feds / 2008 / 200829 / 200829pap. pdf. bis central bankers ’ speeches suggests that inflation is not likely to be a problem, then we can more comfortably align policy to continue supporting the recovery. some observers and analysts have voiced great concern that the nascent economic recovery, combined with the actions of the federal reserve that have expanded its balance sheet, will lead to significant inflation. however, figure 11 provides a variety of different measures of core inflation ; core cpi, core pce, trimmed core cpi and trimmed

only a gradual improvement in the economy and employment. to put it plainly, these housing - related headwinds are part of why i do not expect growth greater than 4 percent this year. and while 4 percent is not terrible, at that rate it will still take a very long time to get back to full employment. the second key question is, how concerned should we all be about a flare - up in inflation – and aren ’ t the measures the fed has taken inflationary? many have expressed concern that federal reserve policy actions that expanded our balance sheet dramatically will cause inflation. i firmly believe that in the short run inflation is likely to remain quite low – and that in the longer term we have the tools, and the steadfast commitment, to address inflationary pressures. indeed, while monetary policy works with lags, i would note that it has been more than two years since the fed ’ s balance sheet expanded dramatically. since that time, core inflation of course, the views i express today are my own, not necessarily those of my colleagues on the board of governors or the federal open market committee ( the fomc ). bis central bankers ’ speeches has fallen and core inflation measures using the cpi or pce indexes are at something like 50 year lows. today i will briefly address the role of the low inflation rate for the economy and policymaking. in doing so, i will discuss why inflation concerns have not materialized to date, and why i expect core inflation to remain below 2 percent over the next several years. question 1 : housing and the economic recovery the economic recovery officially began in the third quarter of 2009, according to the organization responsible for dating our recessions – the national bureau of economic research ( nber ). despite being a year and a half into the official recovery, the recovery period has been so tepid that there has been very little improvement in the percentage of the population employed ( see figure 1 ). the percent of the population employed in december was 58. 3, close to the low of this cycle and below the 59. 3 percent employed in july of 2009, when the recovery officially started. for context, the number was around 63 percent when the recession began. the recent stability of the employment - to - population ratio reflects the poor labor market performance of the current recovery. we are simply not generating enough jobs to reduce the number of unemployed persons. nor are we, by the way, providing job opportunities for the so - called “ discouraged workers