along with increasingly explicit forward guidance have reduced the unemployment rate by 1 - 1 / 4 percentage points and increased the inflation rate by 1 / 2 percentage point relative to what would have occurred in the absence of these policies. 3 moreover, the estimates imply that these macroeconomic effects are only now manifesting themselves in full, reflecting the inherent lags in the monetary transmission mechanism. of course, such estimates have a wide band of uncertainty around them. as is well known, a number of potential costs might be associated with qe and the fed ’ s elevated balance sheet. among these are the possibility that elevated securities holdings and low interest rates could pose risks to financial stability, possible effects on the fed ’ s income and remittances to the u. s. treasury, and possible difficulties in conducting policy normalization. 4 such potential difficulties arise because the level of reserve balances will be very high when the fomc begins to raise the federal funds rate, and, consequently, the federal reserve will employ new tools, which have their own benefits and costs, to implement monetary policy. despite these potential costs, we think that asset purchases have had a meaningful effect in promoting economic recovery and helping to keep inflation closer to the fomc ’ s 2 percent goal than would otherwise have been the case. effects of large - scale treasury purchases : evidence on the importance of local supply, ” journal of financial economics, vol. 108 ( may ), pp. 425 – 48 ; and john kandrac and bernd schlusche ( 2013 ), “ flow effects of large - scale asset purchases, ” economics letters, vol. 121 ( november ), pp. 330 – 35 ). the estimates shown in figure 2 are based on an extension of the work done in ihrig, klee, li, schulte, and wei ( 2012 ). because the term premium effect depends on both the fed ’ s current and expected future asset holdings, most of this effect – without further unexpected policy actions – will likely wane over the next few years as the balance sheet begins to normalize. see jane ihrig, elizabeth klee, canlin li, brett schulte, and min wei ( 2012 ), “ expectations about the federal reserve ’ s balance sheet and the term structure of interest rates ( pdf ), ” finance and economics discussion series 2012 – 57 ( washington : board of governors of the federal reserve system, july ). see eric engen, thomas lau

course, include the many advances for encrypting and filtering information. we may even see the deployment of technologies that permit individuals to make choices calibrating their degree of privacy in conducting individual transactions. with some irony, even some of the ability of the government to pursue protection of individual rights is being impaired by effective encryption. this leads to the important question of how to balance the legitimate expectations of individuals for privacy with the needs of government for information to effectively administer the laws and provide for the public safety. the most delicate care is needed in this regard to prevent unnecessary intrusion when specific government decisions are implemented and to avoid the risk of a gradual, long - term erosion of privacy. beyond these issues are immediate questions about privacy in the delivery of professional, commercial, and financial services over open computer networks as well as personal communications through devices such as e - mail. for example, there are typically strong assumptions about privacy surrounding medical, legal, and financial communications and records. these assumptions are designed to safeguard the autonomy of the individual and to facilitate a society where special expertise can be developed and called upon, when necessary, to promote the individual ’ s welfare. it would be a strange outcome, indeed, if traditional notions of privacy applied only at the physical office of the doctor, lawyer, or banker, but not when modern computer technologies were employed to make professional services available at lower cost and with greater convenience. it may be that some services and communications channels will be used regardless of what privacy guarantees are provided. providing medical advice by computer network to rural areas with no resident doctors may be one example. more common services, however, such as certain cellular telephone technologies and the use of e - mail over the internet, are subject to less privacy than some other modes of communication, although extensive efforts are currently being directed to address that. the growing use of credit cards without security measures to pay for goods and services over open networks is another example. clearly, as these examples demonstrate, privacy concerns may be outweighed, if only for the moment, by other factors such as cost and convenience. however, given choices in the marketplace that include price, quality and differing degrees of privacy, i have little doubt that privacy would be valued and sought after. in the financial sphere, the payment systems of the united states present a paradox. our systems, and banking arrangements, for handling high - value dollar payments are all electronic and have been for many years. banking records, including those for loans and deposits, have been