board of governors in washington, d. c. this unique governance structure requires that i forewarn you that the views i express are my own and do not necessarily reflect those of the federal reserve system or my colleagues on the federal open market committee ( fomc ). economic conditions the u. s. economy is now nearly five years into a recovery that began in june 2009. the recovery has been lackluster in many ways, yet it has made considerable progress nonetheless. the unemployment rate, for example, has fallen from its peak of 10. 0 percent to 6. 6 percent. employment gains have restored some 7. 8 million jobs since the trough, representing about 90 percent of the jobs lost since the peak. stock prices have recovered, bis central bankers ’ speeches housing prices are up, and earnings at many businesses are healthy. it is my general view that the u. s. economy is on firmer footing today than it has been in several years. this is a cause for some optimism for continued progress in 2014. in recent weeks, there has been a blizzard of economic reports, which have come in weaker than expected. i believe that weakness largely reflects the severe winter weather rather than a frozen recovery. so, we must be wary of attaching too much significance to the latest numbers. as a monetary policymaker, i prefer to take a longer view rather than let our decisions be whipsawed by the most recent statistics, which are often noisy and subject to revision. because monetary policy tends to work with a lag, we must keep our attention focused on the intermediate - to longer - term underlying trends if we are to make wise decisions. based on the latest gdp numbers revised last week, the u. s. economy performed noticeably better in the second half of 2013 than in the first half. specifically, real output grew at a 3. 3 percent pace in the second half of the year compared with 1. 8 percent in the first half. while this is far from the robust growth that many would like to see, it continues to represent steady progress and an improving economy. my forecast calls for about 3 percent growth in 2014. this is in line with the central tendency of 2. 8 to 3. 2 percent growth reported by my colleagues on the fomc in december 2013. there has been discussion of some recent weakness in consumer spending, housing starts, and housing sales. for instance, in january, total retail sales fell by 0. 4 percent ; housing starts dropped

somewhat better pace than in 2012. this consistent pace of job growth was enough to drop the unemployment rate to 6. 6 percent in january. i expect that the unemployment rate will reach about 6. 2 percent by the end of 2014, and, if anything, that may prove too pessimistic. given the recent trends, an unemployment rate below 6 percent is certainly plausible. in terms of the other part of the fed ’ s mandate, inflation has been running somewhat below the fomc ’ s long - run goal of 2 percent. the fed ’ s preferred measure of inflation is the yearover - year change in the price index for personal consumption expenditures, or pce inflation. it came in at 1. 1 percent last year. it is important to defend our 2 percent inflation target both from below and above. yet, i anticipate, as the fomc indicated in its most recent statement, that inflation will move back toward our target over time. economic growth is firming, and some of the factors that have held inflation down, such as the one - time cut in payments to medicare providers, are likely to abate over time. an additional and important determinant of actual inflation is consumer and business expectations of inflation. i am encouraged that inflation expectations remain near their longer - term averages and consistent with our 2 percent target. given the large amount of monetary accommodation that we have added and continue to add to the economy, i think there is some upside risk to inflation in the longer term. of course, with any forecast, there are risks. while there continues to be some downside risk to growth, for the first time in years, i see the potential for more upside risk to the economic outlook. we need to consider this possibility as we calibrate monetary policy. monetary policy so let me turn to some issues for monetary policy. the federal reserve has taken extraordinary policy actions to support the economic recovery. the fed has lowered its policy rate – the federal funds rate – to essentially zero, where it has been for more than five years. since the policy rate cannot go any lower, the fed has attempted to provide additional accommodation through large - scale asset purchases. we are now in our third round of this quantitative easing. since september 2012, the fomc has added about $ 1. 3 trillion in long - term treasuries and mortgage - backed securities to its balance sheet through this program, buying at a pace of $ 85 billion a month in