where further research is required. i will conclude by reiterating one aspect of the low interest rate and low productivity growth problems that i have mentioned previously — the fact that, for several years, the fed has been close to being “ the only game in town, ” as mohamed el - erian described it in his recent book. 5 but macroeconomic policy does not have to be confined to monetary policy. certain fiscal policies, particularly those that increase productivity, can increase the potential of the economy and help confront some of our longer - term economic challenges. while there is disagreement about what the most effective policies would be, some combination of improved public infrastructure, better education, more encouragement for private investment, and more effective regulation all likely have a role to play in promoting faster growth of productivity and living standards. by raising equilibrium interest rates, such policies may also reduce the probability that the economy, and the federal reserve, will have to contend more than is necessary with the effective lower bound on interest rates. 1 views expressed are mine and are not necessarily those of the federal reserve board or the federal open market committee. 2 see stanley fischer ( 2016 ), “ why are interest rates so low? causes and implications, ” speech delivered at the economic club of new york, new york, october 17. 3 see janet l. yellen ( 2016 ), “ macroeconomic research after the crisis, ” speech delivered at “ the elusive ‘ great ’ recovery : causes and implications for future business cycle dynamics, ” 60th annual economic conference, held at the federal reserve bank of boston, boston, october 14. 4 see, for example, olivier blanchard, eugenio cerutti, and lawrence summers ( 2015 ), “ inflation and activity — two explorations and their monetary policy implications ( pdf ), " imf working paper wp / 15 / 230 ( washington : international monetary fund, november ) ; and dave reifschneider, william wascher, and david wilcox ( 2015 ), “ aggregate supply in the united states : recent developments and implications for the conduct of monetary policy, " imf economic review, vol. 63 ( march ), pp. 71 – 109. 5 see mohamed a. el - erian ( 2016 ), the only game in town : central banks, instability, and avoiding the next collapse ( new york : random house ). 2 / 2 bis central bankers'speeches

. while the authorities have set the growth target at around 7. 5 percent, some of them have said that some downward deviation from 7. 5 percent is within the target range. it is better to take a conservative view that china ’ s growth rate is likely to be around 7. 5 percent at its highest, despite the government ’ s measures to underpin economic activity. d. risks to overseas economies the outlook for overseas economies that i have explained is subject to both upside and downside risks. geopolitical risks such as the recent situation in ukraine should be carefully monitored in the short run. in addition, i am personally concerned about the possibility of a disinflationary trend and decline in potential growth rates in europe and the united states in the medium to long run ( chart 10 ). the euro area in particular should be carefully monitored as the disinflationary trend might be prolonged, mainly in peripheral countries. several peripheral countries in particular are expected to continue facing downward pressure on wages in order to retain competitiveness under the appreciation of the euro, and the european commission and the european central bank ( ecb ) have revised down their inflation forecasts for both this year and the next. medium - to long - term inflation expectations both in europe and the united states have been stable at around 2 percent, which is one of the reasons why the policy authorities in the euro area have taken the view that it will not enter stagnant deflation like japan ( chart 11 ). however, japan ’ s experience suggests the possibility that low inflation continuing for a long time changed people ’ s inflation expectations in a backward - looking manner, and thus medium - to long - term inflation expectations also lowered adaptively. in fact, as the disinflationary trend continues, short - and medium - term inflation expectations by economic entities and the markets have already started to decline somewhat in the euro area as well. if the stability in medium - to long - term inflation expectations is undermined, various policy actions are expected to be taken. the ecb has already revealed its policy stance that it will not hesitate to make use of unconventional measures to address the risk of prolonged disinflation, and i therefore am keeping a watchful eye on its future conduct of monetary policy. it should also continue to be noted that the financial system is still somewhat fragile in the euro area. in the united states, deflationary concerns have not been observed so far, and instead shortterm inflation