one takes precedent over the other. we believe this transparency about the balanced approach the fomc takes has served us well over the past decade when high unemployment called for extraordinary policies that entailed some risk of inflation. the review of our current framework will be wide ranging, and we will not prejudge where it will take us, but events of the past decade highlight three broad questions. three questions the first question is, “ can the federal reserve best meet its statutory objectives with its existing monetary policy strategy, or should it consider strategies that aim to reverse past misses of the inflation objective? ” under our current approach as well as that of most flexible inflation - targeting central banks around the world, the persistent shortfalls of inflation from 2 percent that many advanced economies have experienced over most of the past decade are treated as “ bygones. ” this means that policy today is not adjusted to offset past inflation shortfalls with future overshoots of the inflation target ( nor do persistent overshoots of inflation trigger policies that aim to undershoot the inflation target ). central banks are generally believed to have effective tools for preventing persistent inflation overshoots, but the for a discussion of this terminology and references, see english, lopez - salido, and tetlow ( 2015 ) and clinton and others ( 2015 ). - 6effective lower bound on interest rates makes persistent undershoots more likely. persistent inflation shortfalls carry the risk that longer - term inflation expectations become poorly anchored or become anchored below the stated inflation goal. 10 in part because of that concern, some economists have advocated “ makeup ” strategies under which policymakers seek to undo, in part or in whole, past inflation deviations from target. such strategies include targeting average inflation over a multiyear period and price - level targeting, in which policymakers seek to stabilize the price level around a constant growth path. 11 these strategies could be implemented either permanently or as a temporary response to extraordinary circumstances. for example, the central bank could commit, at the time when the policy rate reaches the elb, to maintain the policy rate at this level until inflation over the elb period has, on average, run at the target rate. 12 other makeup strategies seek to reverse shortfalls in policy accommodation at the elb by keeping the policy rate lower for longer than these risks could be exacerbated if households and businesses expect monetary policy to be insufficiently accommodative because of proximity to the elb.

for release on delivery noon est february 22, 2019 the federal reserve ’ s review of its monetary policy strategy, tools, and communication practices remarks by richard h. clarida vice chair board of governors of the federal reserve system at the 2019 u. s. monetary policy forum, sponsored by the initiative on global markets at the university of chicago booth school of business new york, new york february 22, 2019 i am pleased to participate in this year ’ s u. s. monetary policy forum, which, since its inception, has brought together policymakers, academics, and market participants to share ideas and perspectives on u. s. monetary policy. today i would like to discuss the broad review of the federal reserve ’ s monetary policy framework that we are undertaking this year. we will examine the policy strategy, tools, and communication practices that we use to pursue our dual - mandate goals of maximum employment and price stability. in my remarks, i will describe the motivation for and scope of this review and will preview some of the events we are planning as part of it. 1 the u. s. monetary policy forum is an excellent venue for this presentation. for more than a decade, it has focused attention and timely analysis on critical issues confronting the federal open market committee ( fomc ). its programs have drawn on the latest economic research and considered a range of views. similarly, the federal reserve ’ s review of its monetary policy framework will be transparent, will be open minded, and will seek perspectives from a broad range of interested individuals and groups, including academics, other specialists, and the public at large. motivation for the review the fact that the system is conducting this review does not suggest that we are dissatisfied with the existing policy framework. indeed, we believe our existing framework has served us well, helping us effectively achieve our statutorily assigned dual - mandate goals of maximum employment and price stability. nonetheless, in light of the unprecedented events of the past decade, we believe it is a good time to step back and assess whether, and in what possible ways, we can refine our strategy, tools, and i would like to thank etienne gagnon for his assistance in preparing these remarks. - 2communication practices to achieve and maintain these goals as consistently and robustly as possible. i note that central banks in other countries have conducted periodic reviews of their monetary policy frameworks, and their experience has informed the approach we are pursuing. as chairman powell has indicated, with the u. s