potentially affect the economic outlook. of course, it is too early to know what policy changes will be put in place or how their economic effects will unfold. while it is not my intention to opine on specific tax or spending proposals, i would point to the importance of improving the pace of longer - run 2 / 3 bis central bankers'speeches economic growth and raising american living standards with policies aimed at improving productivity. i would also hope that fiscal policy changes will be consistent with putting u. s. fiscal accounts on a sustainable trajectory. in any event, it is important to remember that fiscal policy is only one of the many factors that can influence the economic outlook and the appropriate course of monetary policy. overall, the fomc ’ s monetary policy decisions will be directed to the attainment of its congressionally mandated objectives of maximum employment and price stability. finally, the committee has continued its policy of reinvesting proceeds from maturing treasury securities and principal payments from agency debt and mortgage - backed securities. this policy, by keeping the committee ’ s holdings of longer - term securities at sizable levels, has helped maintain accommodative financial conditions. thank you. i would be pleased to take your questions. 3 / 3 bis central bankers'speeches

saw the fastest growth in world output in three decades. we expect growth this year to be less spectacular but still robust. but while the us and china are still expanding strongly, growth has showed signs of faltering in japan and, to a lesser extent, in our major overseas market, the euro area, and especially germany. we think this weakness is likely to prove temporary, but we could be disappointed. unbalanced growth creates strains. the us has a large current account deficit, which is mirrored by surpluses in the other major trading blocks. the risk is that a better balance will only come about through sharp adjustments in exchange rates and a marked increase in us savings, which may cause a slowdown in global activity. closer to home, there is uncertainty about the near term momentum of household spending, by far the largest influence on domestic demand. while it is difficult to be confident about the path of retail sales since the autumn, there is little evidence of much underlying buoyancy. retail sales are not the whole story, and our central view is that any weakness in consumer spending is likely to be temporary. but we could easily be wrong. the other key uncertainty concerns the speed with which inflation will pick up. consumer price inflation remains below the government ’ s 2 % target but there are good reasons to expect it to rise over the next few years. input cost inflation has risen sharply, and import prices are not falling as much as they were. we think there is very little slack in the economy. the labour market is certainly tight. but the growth in labour costs has been surprisingly muted, and some cost pressures have been absorbed by lower profit margins. how long can this last? at present we think inflation is likely to rise above target sometime next year, though we judge the risks to be somewhat on the downside. but it ’ s a difficult call, and our judgement about the balance of risks will be influenced by the way the data shape up in the coming months. the mpc faces a familiar dilemma, torn between the importance of well grounded analysis and the need to act promptly. on the one hand, there is a case for waiting for more evidence on the issues that underlie these risks – as there almost always is ; on the other hand, since interest rates take a year or more to affect the economy, we need to be pre emptive, to head off trouble at the pass so to speak, even at the risk of sometimes taking the wrong decision. if we