of risk that i judge unacceptable. as i consider the outlook for financial regulation, i am hopeful but realistic regarding whether next time things will be different. regulatory agencies have been given a mandate and authority to strengthen oversight of the largest firms. success will depend on whether we choose to make hard calls and to use the new authority with integrity, fairness and resolve. monetary choices i want to spend my remaining time on monetary policy. i acknowledge that there are different perspectives on the array of economic data we receive and analyze, and therefore there are legitimate, differing views about what is best for the economy. the federal reserve has a dual mandate to pursue stable prices and stable long - term growth. the entire fomc is committed to pursuing those goals, but there are differing views on the causes and fixes to our current situation. i have been at the fed through past swings in the business cycle. there is today a familiar theme as i listen to the media, various economists and “ market experts. ” they say we are entering the era of a “ new normal ” in which we have to accept high unemployment and low income growth and that interest rates will remain at zero indefinitely. they warn that deflation is a serious risk and that the u. s. could become another japan, which must be avoided at all costs. before this week ’ s fomc meeting, the wall street journal wrote that the fed would add more stimulus into the economy – including the purchase of long - term treasuries. it turns out that reporter was remarkably prescient. i share these concerns about our economy. economic conditions are far from satisfactory, unemployment is simply too high, and we want a stronger recovery. but as much as i want short - term improvement, i am mindful of possible longer - term consequences of zero interest rates and further easing actions. rather than improve economic outcomes, i worry that the fomc is inadvertently adding to “ uncertainty ” by taking such actions. remember, high interest rates did not cause the financial crisis or the recession. let me summarize four key points that i judge relevant in choosing among monetary policy options. trend data show modest recovery the recovery is proceeding as many economists earlier this year outlined that it would. it is a modest recovery, with mixed results. yet, gdp is likely to expand at somewhere around a 3 percent rate through the remainder of the year. month - to - month data will be mixed, as is typical during recovery. for example, industrial

unintended consequences and uncertainty. a zero policy rate during a crisis is understandable, but a zero rate after a year of recovery gives legitimacy to questions about the sustainability of the recovery and adds to uncertainty. market motives we were reminded of the critical nature of our financial markets when they locked up during the crisis. we need markets to function smoothly. however, market participants should not direct policy. when mixed data are reported as systematically negative results, and the more positive, long - term growth trends fail to be adequately acknowledged, it is an invitation to hasty actions. of course the market wants zero rates to continue indefinitely : they are earning a guaranteed return on free money from the fed by lending it back to the government through securities purchases. the current recovery in its first year saw gdp grow an average of 3. 2 percent. the gdp growth rate for the 1991 recovery was 2. 61 percent ; and for the 2001 recovery, it was 1. 92 percent. we would all like to see a stronger recovery, but slow growth is not a decline in growth and we should not react hastily. the summer of 2010 has seemed strikingly familiar to me. i recently went back and looked at news reports for the spring and summer of 2003, just prior to when the fomc lowered the fed funds rate to 1 percent, where it remained until 2004. i ’ ll provide just two examples. in june 2003, one prominent economist noted in usa today : “ the federal reserve board recently warned that america faces a risk of [ deflation ]. japan has been suffering from it for more than a decade. europe may be heading toward it. the entire world economy could succumb to it. … this could be the first round in a deflationary cycle. the commerce department reports orders to u. s. factories slipped 2. 9 % in april from march, the largest decline in 17 months. … with fewer jobs and stagnant wages, americans won ’ t be able to buy enough to keep the economy going. ” also in june 2003, a boston globe columnist noted : “ on the surface, one can make the case that the fed doesn ’ t have to do anything at all. interest rates are incredibly low …. still, the fed will not sit on its hands. chairman alan greenspan and his deputies have done everything but advertise the coming rate cut on the goodyear blimp. their motivation is to avoid deflation. … another rate cut, even a cut