is to be data dependent. and, like everyone, my own research and experiences shape my views on setting that policy. i was at the council of economic advisers during the euro - area crisis, and my work on emerging economies - particularly russia and some african economies - has taught me how difficult it can be to forecast in highly uncertain environments. taking all these lessons into account, i approach all our monetary policy discussions with the same mindset : be prepared to adjust the outlook based on incoming data while being humble about our ability to draw firm conclusions and thus not overreacting to a few data points. seek out useful data sources, including high - frequency data that may better capture evolving economic developments. and follow a risk - management approach that considers not only the expected outcomes, but also various risks to the outlook. of course, it is tempting to follow the old adage of " never make predictions, especially about the future. " but ultimately, policymaking must be forward - looking, which means relying, at least in part, on forecasts. the challenge is to figure out which models apply. for example, when i began studying banks in the post - soviet era for my dissertation, i found that the standard models used in normal times and for mature, industrialized economies are less useful in highly uncertain environments. since my first fomc meeting last june, my data - dependent, risk - management approach has led me to support the fed's response of frontloading monetary policy tightening to bring inflation under control. after the swift policy response of the past year, monetary policy is now in restrictive territory. for instance, real interest rates are positive across the yield curve. 5 going forward, i am weighing the implications of stronger momentum in the economy against potential headwinds from recent developments. on the one hand, if tighter financing conditions restrain the economy, the appropriate path of the federal funds rate may be lower than it would be in their absence. on the other hand, if data show 4 / 5 bis - central bankers'speeches continued strength in the economy and slower disinflation, we may have more work to do. the fomc has been raising rates in smaller increments as we seek a sufficiently restrictive monetary policy stance to return inflation to 2 percent over time. by taking smaller steps, we can observe economic and financial conditions and consider the cumulative effects of our policy actions. for the econometricians, this approach is similar to the iterative procedure in maximum likelihood

##s from marketable instruments dampened overall m3 growth. a further strengthening in the deposit base of mfis in a number of stressed countries took place in december, in combination with further capital inflows into the euro area, both of which continued to reduce fragmentation. the annual growth rate of loans to the private sector ( adjusted for loan sales and securitisation ) remained negative in december. this mainly reflected ongoing negative annual growth of loans to non - financial corporations, which was – 1. 3 % in december after – 1. 5 % in november. however, annual growth in mfi loans to households remained broadly unchanged at 0. 7 % in december. to a large extent, subdued loan dynamics reflect the current stage of the business cycle, heightened credit risk and the ongoing adjustment in the balance sheets of the financial and non - financial sectors. in line with these developments, the bank lending survey for the fourth quarter of 2012 confirms the weakness in credit demand and the continued effect of credit risk considerations on the tightening of credit standards. at the same time, the survey confirms the positive impact of eurosystem measures on banks ’ overall funding and liquidity situation. in particular, banks reported improvements across all funding categories in the fourth quarter. in order to ensure adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential to continue strengthening the resilience of banks where needed. decisive steps for establishing an integrated financial framework will help to accomplish this objective. the future single supervisory mechanism ( ssm ) is one of the main building blocks. it is a crucial move towards re - integrating the banking system. to sum up, the economic analysis indicates that price developments should remain in line with price stability over the medium term. a cross - check with the signals from the monetary analysis confirms this picture. as regards other policy areas, structural reforms and fiscal adjustment can complement each other, thereby improving the outlook for job creation, economic growth and debt sustainability. past policy action is bearing fruit, in terms of both the unwinding of existing fiscal imbalances and the reduction of current account deficits. in particular, in several countries with particular adjustment needs, contained growth in unit labour costs signals greater price competitiveness and exports are performing better. governments should build on the progress achieved in fiscal consolidation, strengthen competition in product markets and continue with labour market reforms. this would boost the euro area ’ s growth potential, reduce high structural unemployment and improve the adjustment capacities of the euro area