fed is sowing the seeds of future inflation, as in the 1970s. they believe we should be taking back accommodation – some say now, some say soon – as the recovery gains some more steam or inflation creeps up a few more tenths. i don ’ t see it that way. rather than fighting the inflation ghosts of the 1970s, i am more worried about repeating the mistakes of the 1930s. as in the 1930s, today we see a lack of demand for loans and a resistance of lenders to take on risk – factors that mean the high level of bank reserves is not finding its way into broader money measures. as in the 1930s, today ’ s low treasury interest rates in good part reflect elevated demand for low - risk assets – we see investors run to u. s. treasury markets every time they hear any bad economic news from anywhere in the world. consider another metric for interest rates, the well - known taylor bis central bankers ’ speeches rule, which captures how monetary policy typically adjusts to output gaps and deviations in inflation from target. its prescriptions would call for the federal funds rates to be something like – 3. 6 percent now, well below the zero lower bound the funds rate is currently stuck at. our large - scale asset purchases have provided additional stimulus, but by most estimates not enough to bring us down to the taylor rule prescriptions. also, i should note that in 1998, friedman gave a similar recommendation to the japanese, advocating that the bank of japan undertake more accommodation by buying government bonds on the open market. other critics raise the specter of 1970s - like structural changes in the economy. such changes, they argue, have reduced our productive potential, in particular the mechanisms by which resources – most notably labor – move from declining to expanding sectors of the economy. 3 i am acutely aware of the costs of making such an error. no central banker wants to repeat the painful experiences of the 1979 – 83 period. indeed, the fomc discussed this issue at great length ( see the minutes of our january 2011 meeting ). 4 however, i have yet to see empirical evidence based on a modeling framework that successfully captures u. s. business cycle dynamics that shows such supply - side structural factors can come close to explaining the huge shortfalls in actual gdp from trend and the high level of unemployment. for example, extended unemployment insurance and increased difficulties in matching workers to vacant jobs may have resulted in a transitory increase in the natural rate of unemployment, but

elisa ferreira : from repair to vision - conceptions for a common beneficial and resilient financial architecture and institutional framework in the eu address by ms elisa ferreira, vice - governor of the bank of portugal, on the panel " from repair to vision : conceptions for a common beneficial and resilient financial architecture and institutional framework in the eu " at the " financial stability conference 2018 ", lisbon, 31 october 2018. * * * the setting up of the single rulebook in the european union ( eu ) and the launch of the banking union ( bu ) with its rules and institutions constitute a commendable success of the post - crisis financial sector reforms in europe ; however the lack of political will to complete the architecture seriously jeopardises its key benefits. recent cases highlighted what i would call an ‘ accountability conundrum ’. banks nowadays are mostly ‘ european in life but remain national in death ’. this means that, while supervisory and resolution decisions are mostly taken at european level, the ensuing consequences still lie with taxpayers at national level, with potential serious impacts on national budgets. as the ultimate guarantor of financial stability remains national, but with limited tools to act, this ‘ accountability conundrum ’ needs to be solved. this unstable balance that emerged in the eu prevents economic agents from fully reaping the expected benefits of economic integration. europe needs concrete plans going forward, and must address pressing questions on what is still missing to safeguard financial stability. absent a fully - fledged european deposit insurance scheme ( edis ) in the short to medium term, a plan is urgently needed for the interim period ( until the bu can be completed ). among the possible topics for debate, i would suggest : 1. first, the development of a specific institutional regime to address member states ’ concerns over the risks of potential failures of cross - border banking groups : host member states within the bu need tools to address financial stability risks arising from locally systemic undertakings ; the absence of such instruments currently hinders progress on issues such as : ( i ) the adoption of waivers on liquidity and capital, and ( ii ) the removal of options and national discretions ( onds ) which are in close connection, among others, with : the rethinking of the single point of entry ( spe ) / multiple point of entry ( mpe ) resolution models ; in particular, the generalisation of the spe model within the bu requires that both the concerns at group level ( home ) and