they can be sustained for a time, but not indefinitely. they could be diffused gradually and smoothly. but the transitions to a more sustainable equilibrium could also bring a risk of greater volatility in asset prices, less stability in macroeconomic outcomes, and more uncertainty. this could mean a less benign future environment for u. s. monetary policy. the potential uncertainties posed by these challenges may be more troubling because of confidence engendered by the stability and resilience of the u. s. economy over the past decade. we are in the midst of an unusual dynamic in financial markets, in which low realized volatility in macroeconomic outcomes, low realized credit losses, greater confidence in the near term path of monetary policy, low uncertainty about future inflation and interest rates, rapid changes in the nature of financial intermediation ( role of hedge funds and the change in how credit risk is bought and managed ), and a large increase in the share of global savings that is willing to move across borders, have worked together to bring risk premia down across many asset prices. there is no reliable analytical framework one can use to determine whether we are experiencing an unwelcome or unjustified decline in expected volatility, or whether investors are giving too much weight to the relative stability of the recent past and too little to the uncertainty posed by the challenges ahead. and analysts can point to good fundamental reasons and some plausible theories to support this collective judgment of market participants about low future risk and volatility. but there is much we do not understand about how these transitions ahead will unfold - in fiscal positions, the u. s. external imbalance, and in the exchange rate system and portfolio preferences. the recognition that things that are not sustainable will eventually come to an end does not give us much of a guide to whether the transition will be calm or exciting. these dimensions of the broader context in which we will be making monetary policy in the years ahead put a very important premium on keeping u. s. monetary policy as close to the frontier of credibility as possible. and this suggests we need to continue to examine the case for a measured further evolution in the u. s. monetary policy framework - evolution in the direction of finding ways to provide more clarity about our long term inflation objective, about the underlying forces shaping the federal open market committee's forecast, the dimensions of uncertainty that surround that forecast, and the likely implications for monetary policy, to the extent we are

reserve's section 13 ( 3 ) powers on the evolution of financial markets and the economy, as well as official sector responses to future economic crises? in responding to a crisis, how should the official sector best calibrate its lending response through the central bank, compared to its spending response through the fiscal authorities? and, in an emergency like the covid - 19 pandemic, where should decisions about the allocation of resources in the economy rest? if independence is prized in allocating emergency aid, should there be a new, independent agency with responsibility for economic investment? 23 these are interesting theoretical questions. in practice, however, the federal reserve is what congress has made it. its coordination with treasury and its administration of economic relief proceed as congress has directed. looking ahead i would like to leave you with some observations on challenges still ahead of us — in the near term, medium term, and long term. near - term challenges — those arising within the next twelve months — are many. to manage them, i commend to you martin wolf's advice : " above all, make sure we get through this. that is our chief aim. " 24 like many of you, i have confronted new legal and compliance questions arising from a remote workforce, and have had to balance new priorities against ongoing commitments. to get through this, we have to do both. we have to walk and chew gum at the same time. financial institutions have to sustain — and, in some cases, improve — cyber security and anti - money laundering programs. 25 the pandemic is no excuse to lower your guard. if anything, there is a heightened need for cyber vigilance. many federal agencies have published warnings of pandemic scams aimed at financial institutions and their customers. 26 among other schemes, hackers and digital con - artists may try to exploit the realities of the " digital divide. " employees and customers without regular internet access at home may resort to connecting from public places. there are inherent risks to viewing or printing confidential information outside of secure locations. those risks could be magnified in the decentralized environments that now count as our places of business. https : / / www. newyorkfed. org / newsevents / speeches / 2020 / hel200625 2 / 4 the federal reserve ’ s pandemic response - federal reserve bank of new york in the medium term — by that i mean over the next couple of years — we need to anti