other short - term interest rates. the ample reserves framework has three elements designed to maintain the federal funds rate within the target range. the first, not surprisingly, is supplying an amount of reserves that banks hold at the federal reserve that is “ ample. ” by that, we mean that the supply of reserves is adequate to efficiently and effectively implement monetary policy. here, “ efficient ” means that the level of reserves is not excessive, relative to what ’ s needed to be effective. and “ effective ” means that typical temporary movements in the demand or supply of reserves don ’ t cause large changes in the federal funds rate without active management of reserves. i ’ ll come back to the challenge of knowing what constitutes “ ample ” later. the second element consists of the interest rates that the fed itself sets and that influence the federal funds rate. these “ administered ” rates, as they are known, include the interest rate paid to banks on their reserve balances and the overnight reverse repo rate that the fed pays to a wider set of money market participants on a similar, risk - free overnight investment. these first two elements — an ample quantity of reserves and administered interest rates — are meant to do the lion ’ s share of work to keep the federal funds rate within the target range. but there may be relatively infrequent situations when these two elements are not enough to keep the federal funds rate within the target range. therefore, the third element is the directive from the fomc for the new york fed ’ s open market trading desk ( the desk ) to conduct open market operations as needed to keep the federal funds rate within the target range. for example, through repurchase agreements of treasury and agency securities, the fed can temporarily increase the amount of reserves in the system. to support the economy in the aftermath of the financial crisis, the fomc increased its long - term securities holdings dramatically. this led to a similarly large increase in reserves, which peaked at about $ 2. 8 trillion in 2014. subsequently, growth in non - reserve liabilities such as currency and reductions in the fed ’ s securities holdings caused reserve levels to decline. as the level of reserves has come down, we stepped up our monitoring of the effect of reserve levels on interest rates. the level of reserves consistent with “ ample ” is inherently highly uncertain, so we have been actively looking for signs that reserves might be growing scarce. along with in - depth analysis of conditions in money markets, we conduct surveys of

under pressure. business managers, with little opportunity to raise prices, have moved aggressively to stabilize cash flows by trimming workforces. these efforts have limited the rise in unit costs, attenuated the pressure on profit margins, and ultimately helped to preserve the vast majority of private - sector jobs. to the extent that businesses are successful in stabilizing and eventually boosting profits and cash flow, capital spending should begin to recover more noticeably. such success would likely be accompanied by a decline in elevated risk premiums back to more normal levels and, with real rates of return on high - tech equipment still attractive, should provide an additional spur to new investment. when capital spending fully recovers, its growth is likely to be less frenetic than that which characterized 1999 and early 2000 - - a period during which outlays were boosted by the dislocations of y2k and the extraordinarily low cost of capital faced by many firms. still, the evidence strongly suggests that new technologies will present ample opportunities to earn enhanced rates of return. indeed, reports from businesses around the country suggest that the exploitation of available networking and other information technologies was only partially completed when the cyclical retrenchment of the past year began. many business managers are still of the view, according to a recent survey of purchasing managers, that less than half of currently available new, and presumably profitable, supply chain technologies have been put into use. if the recent more - favorable economic developments continue and gather momentum, uncertainties will diminish, risk premiums will fall, and the pace of capital investment embodying these technologies will increase. as we have witnessed so clearly in recent years, the resulting enhanced growth of productivity will lift our standard of living. the economic and financial developments i have described, of course, have important implications for the federal budget and can help explain a significant portion of the shift in the budget situation over the past year. a year ago, the congressional budget office expected the unified surplus to continue to mount if no new policy actions were taken and to cumulate to $ 5. 6 trillion for fiscal years 2002 to 2011. as you know, if today's policies remain in place, cbo is currently forecasting a cumulative surplus over the same ten years that is $ 4 trillion below what had been anticipated in its baseline a year ago. cbo calculates that the now less favorable economic assumptions - - especially in the near term - contribute nearly $ 1 trillion - -