up with this demand, but gaps in the underlying infrastructure pose challenges associated with safety, efficiency, and accessibility. in many circumstances, the underlying infrastructure in place today cannot ensure that a fast payment is fully complete before the recipient seeks to use the funds. to complete a payment, the banks behind the transaction need to transfer funds between each other. until this happens, the payment between them is like an “ iou. ” today ’ s systems that transfer funds between banks are not set up to work in a 24 / 7, realtime world. instead, most faster payments settle funds between banks on a deferred basis. deferred settlement entails a buildup of obligations - - like ious between banks - - that could present real risks to the financial system in times of stress. although faster payment systems that rely on deferred settlements can incorporate certain measures to mitigate these risks, these measures may be appropriate for a nascent faster payment market only for a limited time. as we saw with the avalanche of paper checks prior to ach, as the volume and value of faster payments grow over time, the potential risks of deferred settlement to the financial system are also likely to grow. to fully deliver on the promise of faster payments into the future, we need an infrastructure that can support continued growth and innovation, with a goal of settlement on a the faster payments task force viewed 24x7x365 service availability and final funds provided to the recipient within one minute as characteristics of a “ very effective ” faster payment service. faster payments task force, “ faster payments effectiveness criteria, ” january 26, 2016, https : / / fedpaymentsimprovement. org / wpcontent / uploads / fptf - payment - criteria. pdf. 24 / 7 basis in real time. to ensure the robustness of the payment system into the future, banks and other providers acting as their agents should have access to a settlement system that operates 24 / 7 and settles each payment as soon as an individual sends it. while everyone stands to benefit from faster payments, the benefits could be especially important for households and small business owners who face cash flow constraints. we know from the fed ’ s survey of household economics and decisionmaking that four in 10 adults say they would need to cover an unexpected expense of $ 400 by borrowing or selling something, or simply be unable to pay. a forthcoming fed research note estimates that a quarter of households have less than $

that the higher productivity growth alone could not fully account for. the balance between supply and demand can be inferred from movements in utilization rates, specifically in the unemployment rate. when actual output is expanding at the same pace as potential, the unemployment rate will be stable. when output growth outpaces the growth of potential, the unemployment rate declines. and the unemployment rate has declined almost 0. 4 percentage points a year for the past four years. this translates into excess demand growth of 0. 75 to 1 percentage point relative to potential supply growth. the second insight - and enduring old economy wisdom - is that a proximate source of changes in inflation is an imbalance between the levels of aggregate supply and aggregate demand. this can be expressed as an imbalance between actual and potential output or as a divergence of the unemployment rate from the nairu. the imbalance between the growth rates of aggregate supply and demand is, of course, the source of changes in the balance between the levels of aggregate demand and supply. but inflation is related directly to the levels not to the growth imbalance. and, even in the new economy, excess aggregate demand ultimately drives up inflation. thus the limits may have changed, but the consequences of overtaxing the limits remain the same. do we have excess aggregate demand? in my judgment, we have excess demand conditions in the labor market. the central tendency for my estimate of the nairu is in the range of 5 % to 5¼ %, compared to the 4. 1 % current unemployment rate. this estimate is consistent with most large - scale macroeconometric models and with the estimates of the nairu that underlie the economic and budget projections of both the council of economic advisers and the congressional budget office, but there is nonetheless legitimate uncertainty about the estimate of the nairu. this uncertainty has been, in my view, an important consideration in the way monetary policy has responded to recent economic developments. obviously, whether the nairu is closer to 4 % or to 5 % affects the difficulty associated with rebalancing supply and demand to contain the risk of higher inflation. but why has inflation remained moderate if there is persistent excess demand in the labor market? this is still another supply and demand story. the economy is subject to two fundamental types of aggregate economic shocks : supply shocks and demand shocks. these two types of shocks give rise to different challenges for monetary policy. supply shocks come in two varieties : relative price shocks ( such as changes in