, the trajectory of wages and the strength of the labor market. the u. s. expansion is now in its eighth year. by historical standards, it is long in the tooth. despite this, i am optimistic that the economic expansion will continue over the next few years. first, it is important to note that economic expansions don ’ t simply die of old age. usually, they end either because inflation climbs and the federal reserve responds by shifting to a much tighter stance for monetary policy, or because the economy gets hit with a large unanticipated shock that the fed and the fiscal authorities cannot respond to quickly enough, or with sufficient force, to prevent an economic downturn. while economic shocks are, by their very nature, difficult to forecast, the risk that the fed will snuff out the expansion anytime soon seems quite low because inflation is simply not a problem. not only are underlying inflation trends very subdued — for example, the core personal consumption expenditures deflator has risen at only a 1. 7 percent annual rate over the past year — but the economy is not growing much above its sustainable long - term pace. thus, while pressures on labor resources have been increasing, but quite slowly. finally, the recent strengthening of the dollar will put downward pressure on import prices and limit the ability of domestic producers to raise their prices. second, the household sector ’ s financial condition is in unusually good shape for this point in the economic cycle. household indebtedness is relatively low, debt service burdens relative to household income have fallen to levels not seen since at least the early 1980s. moreover, household incomes are rising at a moderate pace, supported by continued job gains and some modest strengthening of wage compensation trends. if households and lenders again become comfortable with financing consumption with debt in addition to income, this will provide additional support to household spending and to the current economic expansion. the challenges in the retail space over the near term, therefore, are not likely to be a shortfall of aggregate demand from households. instead, it seems to me the challenges lie more in how to satisfy households ’ changing demands for goods and services, and the medium through which these demands are satisfied — whether it be brick and mortar or online. also, there is the important issue of how to retain brand loyalty in a world where information is ubiquitous and always near at hand, and it is easy to shift purchases among participants in the retail marketplace. thank you for your kind attention. 5 / 5

action was intended to help forestall some of the adverse effects on the broader economy that might arise from the disruptions in financial markets and to promote moderate growth over time. recent developments in financial markets, including impaired price discovery, have increased the uncertainty surrounding the economic outlook. what originated as a liquidity shock could potentially give rise to increases in credit risk. the committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to meet our dual mandate, fostering price stability and economic growth. warsh, " financial intermediation and complete markets. "