the second half of last year. at that rate, the central tendency of our forecasts for the unemployment rate shows only a small improvement over the course of this year. and inflation is expected to run at or below our 2 percent longer - run goal. a number of factors that i mentioned earlier contribute to our judgment that the pace of expansion is likely to remain modest over coming quarters, including the depressed housing market, small real income gains, and the probability of continued fiscal restraint. in addition, the information on economic activity abroad, particularly in europe, seemed to be pointing to weaker demand for u. s. exports. monetary policy given the magnitude of the global financial crisis and its aftermath, the federal reserve acted to provide unprecedented monetary stimulus to promote and then support an economic recovery. in addition to moving the federal funds rate – our traditional policy tool – close to zero, we have engaged in balance sheet operations that are aimed at lowering longer - term yields. most recently, over the second half of 2011, the fomc decided to increase the average maturity of the federal reserve ’ s securities holdings through a program of purchases and sales and began to reinvest principal payments on agency securities in agency - guaranteed mortgage - backed securities rather than treasury securities. moreover, the fomc has worked to clarify its forward guidance about the future path of the federal funds rate, conditional on the outlook for economic activity and inflation. these actions were intended to put downward pressure on longer - term interest rates, support mortgage markets, and, more broadly, help foster financial conditions that would provide more support to economic growth. at the january fomc meeting, with our current projections for economic activity and inflation in mind, the committee decided that more accommodative financial conditions would be appropriate to help bring both inflation and unemployment back, over time, to levels viewed as consistent with the fomc ’ s longer - run objectives mandated by the congress. the fomc judged that economic conditions, including the outlook for low rates of resource utilization and subdued inflation over the medium run, are likely to warrant exceptionally low levels of the federal funds rate at least through late 2014, more than a year later than it had indicated in the postmeeting statements starting last august. extending the horizon of the forward guidance appeared to shift down investors ’ expectations regarding the future path of the target federal funds rate. if this expectation for low rates is realized, the federal funds rate will have remained near zero for a total of about

market participants without a firm anchor, meaning policy itself could drift - - perhaps dangerously. i do not think that is the case at all. instead, i think this situation reinforces and supports the importance of a clear, steady strategy and a gradual, predictable approach to the removal of accommodation as we continue to monitor the data. the analogy i frequently use is the old pilot's adage of " don't chase the needles. " the control panel of any airplane has an instrument to guide your course : a circular gauge with a vertical bar, or " needle, " running through the center of it. if the bar moves sideways to the left, you are drifting off course and should change course to the left until the bar comes back into the center of the circle ; if it moves to the right, you change course to the right. today these instruments get their inputs from the plane's gps ( global positioning system ) and are fairly sensitive and accurate, but decades ago, when i was a young man first learning to fly in the clouds, they got their information from radio beacons stationed on the ground and were quite squirrelly. the bar could wander from side to side for a while for any of a number of reasons - - distance from the beacon, the angle you were approaching it from, interference from other instruments on the panel, sunspots, or rain - - and because of this uncertainty, the first rule taught to us as young pilots was, " don't chase the needles. " precisely because of the uncertainty around the course inputs, the right strategy was to set a course based on your knowledge of the destination, winds, and performance of your plane ; communicate that course clearly to air traffic control so everyone knew what you were doing ; and then stick to that course steadily even as the course needle might waver from side to side across your instrument. if the needle moved to one side substantially and stayed there pretty consistently, then you would make a small, firm correction - - but even then, only gradually and with clear communication about what you were doing. in a world where you had great confidence in the sensitivity of your instrument, such as in today's gps - based avionics, you could respond immediately to moment - to - moment changes in your course readings, but in the world of radio beacons and sunspots, " chasing the needles " would at best lead to inefficient fishtailing across the sky, and at worst