assigned to the federal reserve by the congress — maximum employment and price stability — that remain unchanged. 7 concluding remarks notwithstanding the recent flow of encouraging macroeconomic data, the economy remains a long way from our goals, and it is likely to take some time for substantial further progress to be achieved. our guidance for interest rates and asset purchases ties the path of the federal funds rate and the size of the balance sheet to our employment and inflation goals. we are committed to using our full range of tools to support the economy for as long as it takes until the job is well and truly done. 2 / 3 bis central bankers'speeches 1 the views expressed are my own and not necessarily those of other federal reserve board members or federal open market committee participants. i would like to thank chiara scotti for her assistance in preparing these remarks. 2 the 2020 statement on longer - run goals and monetary policy strategy is available on the board ’ s website a t www. federalreserve. gov / monetarypolicy / review - of - monetary - policy - strategy - tools - and - communicationsstatement - on - longer - run - goals - monetary - policy - strategy. htm. 3 the statements issued after the september 2020 and subsequent fomc meetings are available, along with other postmeeting statements, on at www. federalreserve. gov / monetarypolicy / fomccalendars. htm. 4 the the board ’ s most recent version of the 2012 statement is available on the at www. federalreserve. gov / monetarypolicy / files / fomc _ longerrungoals _ 201901. pdf. board ’ s website website 5 the fed staff ’ s index of common inflation expectations — which is now updated quarterly on the board ’ s website — is a relevant indicator that this goal is being met. see hie joo ahn and chad fulton ( 2020 ), “ index of common inflation expectations, ” feds notes ( washington : board of governors of the federal reserve system, september 2 ) ; and hie joo ahn and chad fulton ( 2021 ), “ research data series : index of common inflation expectations, ” feds notes ( washington : board of governors of the federal reserve system, march 5 ). 6 see jerome h. powell ( 2020 ), “ new economic challenges and the fed ’ s monetary policy review, ” speech delivered at “ navigating the decade ahead : implications for

other jurisdictions to revisit how supervision and regulation, including capital regulation, could have better contained that risk in both the bank and nonbank sectors. that is why capital levels today are strong. while we have learned from and adapted to the lessons from the global financial crisis, this experience underscores the need for humility and continued vigilance about the risks we may not fully appreciate today. what bank capital is and isn ’ t capital regulation — requiring a bank to operate with what is deemed to be an adequate level of equity based on its asset size and its risks — is a useful tool to strengthen the incentives for banks to lend safely and prudently. first, i ’ ll begin with what capital is — essentially shareholder equity in the bank. people sometimes use the shorthand of banks “ holding capital ” when speaking of capital see gorton and metrick ( 2012 ) for a discussion of the role of repo markets during the crisis ; he and xiong ( 2012 ) for a theoretical treatment of the risks posed by short - term wholesale funding ; and barr ( 2012 ) and duffie ( 2019 ) for retrospectives. - 5requirements ; however, it ’ s helpful to remember that capital is not an asset to be held, reserves to be set aside, or money in a vault ; rather, it is the way, along with debt, that banks fund loans and other assets. without adequate capital, banks can ’ t lend. higher levels of capital mean that a bank ’ s managers and shareholders have more “ skin in the game ” — and have incentives to prudently manage their risks — because they bear more of the risk of the bank ’ s activities. next, let me speak to how capital and debt work together to fund a firm ’ s operations. in theory, companies should be indifferent to the mix of equity and debt they use to fund themselves, since the creditors of a safer firm will lend to it at lower rates and shareholders of a safer firm will accept a lower return on their investment. 9 that may not fully hold for banks because insured depositors are made risk - insensitive through deposit insurance and other creditors may provide lower cost funding if they believe the government may bail out banks in distress. 10 forcing banks to fund more of their activities with equity, instead of debt, could raise the private costs of funding to the bank, and cause banks to pass those higher costs of credit to consumers. these considerations must be balanced against the