percent per year. in some sense, going back to 2007 is a little misleading, because the fomc did not adopt its 2 percent inflation target until january 2012. however, even since that decision, pce inflation has been running lower than 2 percent. so, whether we look over the past six years or over the past two years, inflation has been running too low to be consistent with price stability. the good news is that the fomc does expect inflation to turn back toward 2 percent. however, that return to 2 percent could take a long time. for example, the minutes from the april fomc meeting reveal that the federal reserve board staff outlook is for inflation to remain below 2 percent over the next few years. in a similar vein, earlier this year, the congressional budget office ( cbo ) predicted that inflation will not reach 2 percent until 2018 – more than 10 years after the beginning of the great recession. this subdued inflation forecast may be surprising to some of you. after all, as you look at the chart, you can see that pce inflation has risen relatively rapidly over the past three months and is now 1. 8 percent – very close to the fomc ’ s target. but the chart also clearly shows that many large fluctuations in pce inflation end up being purely transitory. to formulate an bis central bankers ’ speeches accurate forecast for inflation, we need to look through these transitory fluctuations, no matter how large they might be – and that ’ s not always easy. of course, my forecast is only a forecast. i am extremely confident that the actual path of inflation over the next four years will turn out to be higher or lower than what i currently expect it to be! what you should take away, though, is that i currently see the probability of inflation ’ s averaging more than 2 percent over the next four years as being considerably lower than the probability of inflation ’ s averaging less than 2 percent over the next four years. and that ’ s why i conclude my discussion of inflation by saying that the fomc is undershooting its price stability goal. low inflation : why it matters i ’ ve told you that inflation has been, is and will be too low relative to the fomc ’ s target of 2 percent. but why should you care that inflation is too low? isn ’ t it a good thing when goods and services aren ’ t as expensive to buy? there are two answers to this – very good

’ m sure that many of you have questions about that journey. the answers to all of your questions – and probably more – are on a new website that the fed has created at federalreservehistory. org. i encourage you to visit this site to learn more about the people, places and events that have shaped federal reserve history. i won ’ t say too much more about fed history – perhaps to the relief of some of you! – but i do want to address one of the things that i think has changed the most over the federal reserve ’ s history : our communication with the public. a hundred years ago, congress created a system that was designed specifically so that the residents of main street would have a voice in monetary policy. technology has changed a lot since 1914 – i ’ m told that they didn ’ t even have smartphones back then – and so the ways that we gather information from main street have changed. but this fact - finding is still an important part of the making of monetary policy. indeed, earlier today, i met with fargo business leaders to gather exactly this kind of information. communication is a two - way street, however. during the past century, the federal reserve ’ s communications to the public about its monetary policy actions have also evolved greatly. the pace of change was especially rapid in the past eight years under chairman bernanke ’ s leadership. during that time, the federal reserve specified an explicit target for inflation, began holding regular press conferences and greatly expanded its use of forward guidance – that is, its communications about the likely future evolution of policy. so, as the federal bis central bankers ’ speeches reserve system plans for its second century, i would say that the importance of two - way communication is a key lesson from the system ’ s first century. in order for the fed to continue to be effective, it needs to communicate its policy decisions transparently to the public. conversely, it also needs the public ’ s input into how those policies are affecting them. events like the one today, and my meeting with business leaders earlier today, are a key part of fostering that two - way communication. with that background in mind, let me turn back to the federal open market committee and the making of monetary policy. i mentioned that the fomc meets eight times per year. at those meetings, we decide on the level of monetary stimulus for the economy. i won ’ t get into too many details of what that term “ monetary stimulus ”