average inflation rate for personal consumption expenditures over the next 10 years has remained close to 2 percent. surveys of households likewise show that longer - term inflation expectations have been relatively stable. in the financial markets, measures of inflation compensation at longer horizons ( computed from the spread between yields on nominal and inflation - indexed treasury securities ) have moved down, on net, this year but remain within their historical ranges. with long - run inflation expectations stable and with substantial resource slack continuing to restrain cost pressures, it seems likely that inflation trends will remain subdued for some time. the objectives of monetary policy to evaluate policy alternatives and explain policy choices to the public, it is essential not only to forecast the economy, but to compare that forecast to the objectives of policy. clear communication about the longer - run objectives of monetary policy is beneficial at all times but is particularly important in a time of low inflation and uncertain economic prospects such as the present. improving the public ’ s understanding of the central bank ’ s policy strategy reduces economic and financial uncertainty and helps households and firms make moreinformed decisions. moreover, clarity about goals and strategies can help anchor the public ’ s longer - term inflation expectations more firmly and thereby bolsters the central bank ’ s ability to respond forcefully to adverse shocks. 4 the federal reserve has a statutory mandate to foster maximum employment and price stability, and explaining how we are working toward those goals plays a crucial role in our monetary policy strategy. it is evident that neither of our dual objectives can be taken in isolation : on the one hand, a central bank that aimed to achieve the highest possible level of employment in the short run, without regard to other considerations, might well generate recent empirical studies assessing the magnitude of shifts in the sustainable rate of unemployment – the portion of unemployment not attributable to temporary cyclical factors – include barnichon and figura ( 2010 ), dickens ( 2009 ), dowling, estevao, and tsounta ( 2010 ), fleischman and roberts ( 2010 ), fujita ( 2010 ), lindner and tasci ( 2010 ), and kuang and valletta ( 2010 ). see bernanke ( 2007 ). unacceptable levels of inflation without any permanent benefits in terms of employment. on the other hand, a single - minded focus by the central bank on price stability, with no attention at all to other factors, could lead to more frequent and deeper slumps in economic activity and employment with little benefit in terms of long - run

the equity of substantially all of aig's regulated subsidiaries. example, nonconforming jumbo mortgages – cannot be securitized and thus carry much higher interest rates than conforming mortgages. some lenders have reduced borrowing limits on home equity lines of credit. households also appear to be having more difficulty of late in obtaining nonmortgage credit. for example, the federal reserve's senior loan officer opinion survey reported that as of july an increasing proportion of banks had tightened standards for credit card and other consumer loans. in the business sector, through august, the financially strongest firms remained able to issue bonds but bond issuance by speculative - grade firms remained very light. more recently, however, deteriorating financial market conditions have disrupted the commercial paper market and other forms of financing for a wide range of firms, including investment - grade firms. financing for commercial real estate projects has also tightened very significantly. when worried lenders tighten credit, then spending, production, and job creation slow. real economic activity in the second quarter appears to have been surprisingly resilient, but, more recently, economic activity appears to have decelerated broadly. in the labor market, private payrolls shed another 100, 000 jobs in august, bringing the cumulative drop since november to 770, 000. new claims for unemployment insurance are at elevated levels and the civilian unemployment rate rose to 6. 1 percent in august. households'real disposable income was boosted significantly in the spring by the tax rebate payments, but, excluding those payments, real after - tax income has fallen this year, which partly reflects increases in the prices of energy and food. in recent months, the weakness in real income together with the restraining effects of reduced credit flows and declining financial and housing wealth have begun to show through more clearly to consumer spending. real personal consumption expenditures for goods and services declined in june and july, and the retail sales report for august suggests that outlays for consumer goods fell noticeably further last month. although the retrenchment in household spending has been widespread, purchases of motor vehicles have dropped off particularly sharply. on a more positive note, oil and gasoline prices – while still at high levels, in part reflecting the effects of hurricane ike – have come down substantially from the peaks they reached earlier this summer, contributing to a recent improvement in consumer confidence. however, the weakness in the fundamentals underlying consumer spending suggest that household expenditures will be sluggish, at best, in the near