in the reasonably near term. and the immediate challenge in this situation is to try to ensure that, as domestic demand growth in the united states slows – as it probably must, by one means or another – demand picks up sufficiently elsewhere, especially in europe and japan, to take up the running. that in turn will largely determine how successfully we can achieve an orderly unwinding of the present imbalances. this wider international context is, inevitably, having a profound – and continuing – effect on the pattern of interest rates and exchange rates, and on economic developments, both within the eurozone and here in the united kingdom, to an extent that is still perhaps not fully appreciated. a year ago, when the historic decision to go ahead with a broadly - based euro was taken in brussels, the prospect was for a steady pick - up in overall demand and output across the eurozone. it was a helpful environment for the introduction of the new currency. and the constituent currencies of the euro strengthened in the second half of last year on the back of that. the introduction of the euro at the beginning of this year was a technical triumph – within the eurozone, but also notably here in the city, which has clearly established itself from the outset as a vital contributor to the development of broad and liquid euro - denominated wholesale financial markets. but the growing impact of the global economic setback last autumn was to dampen external demand and business confidence in the eurozone – as it did elsewhere – apparently affecting some of the participating countries more than others. in contrast to the united states, slower growth of external demand was not sufficiently offset by stronger domestic demand growth in the eurozone, so that, instead of the expected pick - up in overall output growth, activity in fact increased progressively more slowly. largely as a result, the euro has depreciated in the foreign exchange market and economic performance in individual participating countries has diverged more than might have been expected. this has been a disappointment to some proponents of the euro and has been seized upon by eurosceptics as evidence of its risks. we need to be cautious, in my view, in interpreting this initial experience in the present unusually difficult global economic environment. as demand strengthens in the eurozone – and the latest indicators from germany are more encouraging – the likelihood is that the euro will recover and some of the present tensions ease. it has always been clear that there are potential risks of economic divergence within the euro area

janet yellen : the goals of monetary policy and how we pursue them speech by ms janet l yellen, chair of the board of governors of the federal reserve system, at the commonwealth club, san francisco, california, 18 january 2017. * * * good afternoon. it is a pleasure to join all of you at the commonwealth club today, not the least because the club and the federal reserve have a few things in common. both organizations, as it happens, have a board of governors and a chair. and both the club ’ s and the fed ’ s histories extend back more than a century. the club, as many here know, was founded in 1903, and the federal reserve a decade later. perhaps because of our shared origins in the progressive era, a period of reform in american life, we hold certain values in common. according to your website, the club is nonpartisan and dedicated to the impartial discussion of issues important to your community and the nation. at the fed, we too are nonpartisan and focused squarely on the public interest. we strive to conduct our deliberations impartially and base our decisions on factual evidence and objective analysis. this afternoon i will discuss some challenges we ’ ve faced in our recent deliberations and may face in the next few years. perhaps, though, it is best to start by stepping back and asking, what is — and, importantly, what isn ’ t — our job as the nation ’ s central bank? and how do we go about trying to accomplish it? the federal reserve has an array of responsibilities. i ’ ll mention our principal duties and then focus on one — monetary policy, the responsibility that gets the most public attention. in addition to monetary policy, we — in collaboration with other regulatory agencies at both the federal and state levels — oversee banks and some other financial institutions to ensure they operate safely and soundly and treat their customers fairly. we monitor the financial system as a whole and promote its stability to help avoid financial crises that could choke off credit to consumers and businesses. we also reliably and safely process trillions of dollars of payments for the nation ’ s banks and the federal government and ensure that banks have an ample supply of currency and coin to meet the demands of their depositors. and we work with communities, nonprofit organizations, lenders, educators, and others to encourage financial and economic literacy, promote equal access to credit, and advance economic and community development. but, as i