projected to be no more than a half percentage point above the committee's 2 percent longer - run goal, and longer - term inflation expectations continue to be well anchored. " 9 of course, today's circumstances are much different from those we faced during most of the decade that followed the 2008 financial crisis. i will focus here on two features of 3 / 8 bis - central bankers'speeches our current environment that i see as especially relevant for assessing the role of explicit forward guidance as a monetary policy tool in the current conduct of monetary policy. the first is that with inflation unacceptably high and the resulting urgent need to remove monetary policy accommodation, the federal funds rate is no longer near zero. the committee can now indicate its intended stance of monetary policy through changes to the target range for the federal funds rate - its stated primary tool of monetary policy - rather than relying on more unconventional monetary policy tools, such as forward guidance and balance sheet policy, to serve as the main indicators of the stance of monetary policy. the second is that the outlook for inflation and economic activity is especially uncertain, with significant two - sided risks. gone are the days when the risks to the outlook were skewed to the downside, especially with respect to inflation. and two - sided risks to economic activity are also widely recognized by the public, with press reports of an overheating labor market often featured alongside discussions of high or rising recession risks. in our current environment, i view the benefits of providing explicit forward guidance as lower than they were in the years immediately after the 2008 crisis. given that the federal funds rate is now well above zero, the fomc can communicate changes in the stance of monetary policy through changes in the target range for the federal funds rate and not rely on explicit forward guidance as it did when the federal funds rate was at the effective lower bound. and i would argue that the costs and risks of providing explicit forward guidance are now higher than they were in the decade that followed the last financial crisis. for example, relative to current conditions, it was easier and less risky to provide explicit forward guidance back then ( especially guidance of the low - for - longer variety ). after all, back then, the economy was still weighed down by the after - effects of the 2008 financial crisis, and inflation was running persistently below our 2 percent target. let's contrast those conditions with the ones we face today. with uncertainty about the economic outlook unusually high today, the pre - 2000s

##omc post - meeting statement began to include more direct, but still qualitative, forward guidance regarding the future path of the federal funds rate. 5 notably, this forward guidance did not reference explicit outcomes or specific timelines that would guide the fomc's future policy decisions. evidence suggests that the shift toward more transparent communication by the fomc in the early 2000s, including its use of forward guidance, allowed financial market participants to better anticipate changes in the stance of monetary policy, which were then reflected in broader financial conditions. 6 the 2008 financial crisis significantly altered most assessments of the costs and benefits of providing more explicit forward guidance. with the federal funds rate remaining at near - zero levels for several years after that crisis, the committee had to look for new tools to change its policy stance and affect financial conditions. explicit forward guidance and large - scale asset purchases quickly emerged as the two main new tools of monetary policy. in a way, explicit forward guidance was seen as providing monetary policy accommodation when the current setting of the federal funds rate could not. 7 by providing guidance on specific outcomes that would need to be achieved before the fomc would consider raising the target range for the federal funds rate, the committee could help reduce uncertainty regarding its future policy decisions and keep longer - term interest rates low as the economic recovery progressed. 8 in addition, with the risks to the outlook generally seen as tilted to the downside in the years that followed the financial crisis, using explicit forward guidance to signal a " low for longer " policy was not seen as posing significant risks to the committee's credibility, because short - term interest rates were generally expected to remain unusually low during those years. i should note, however, that even then, low - for - long policies did raise some financial stability concerns, such as those related to reach - for - yield behavior. in addition, the outcome - based forward guidance employed by the fomc in the years following the financial crisis explicitly recognized the possibility that inflationary pressures could emerge. it incorporated a version of an " escape clause " in its forward guidance that would prompt a reconsideration of the policy stance should such inflationary pressures emerge. in particular, in its december 2012 statement, the committee noted that it expected the target range for the federal funds rate to remain at 0 to 1 / 4 percent for " at least as long as the unemployment rate remains above 6 - 1 / 2 percent, inflation between one and two years ahead is