central bank ( ecb ), the recent comprehensive assessment is an important step toward building confidence in euro - area banks. i wish the ecb great success as it takes on its new responsibilities at the center of the single supervisory mechanism. at the federal reserve, we have devoted substantially increased resources to monitoring financial stability and have refocused our regulatory and supervisory efforts to limit the buildup of systemic risk. this macroprudential approach to promoting financial stability will be an important complement to our other tools for promoting a healthy economy. looking ahead in advanced economies, the current macroeconomic policy mix generally remains one of extraordinary monetary policy stimulus and somewhat contractionary fiscal policy. considering the headwinds that continue to weigh on growth, employment, and prices, this situation is hardly ideal. policymakers face difficult choices as they seek to balance the need for long - term fiscal sustainability with the need to support their economies in the near term. even so, i continue to anticipate that the headwinds associated with the financial crisis will wane. as employment, economic activity, and inflation rates return to normal, monetary policy will eventually need to normalize too, although the speed and timing of this normalization will likely differ across countries based on differences in the pace of recovery in domestic conditions. this normalization could lead to some heightened financial volatility. but as i have noted on other occasions, for our part, the federal reserve will strive to clearly and transparently communicate its monetary policy strategy in order to minimize the likelihood of surprises that could disrupt financial markets, both at home and around the world. more importantly, the normalization of monetary policy will be an important sign that economic conditions more generally are finally emerging from the shadow of the great recession. bis central bankers ’ speeches

in addition, in their role as lenders of last resort, central banks acted rapidly to provide liquidity to help stabilize the financial system and support the flow of credit to households and businesses, in some cases creating new lending facilities. these extraordinary and creative responses showed that monetary policymakers had internalized the lessons of the great depression. initially, fiscal policy also provided significant stimulus. a portion of this stimulus reflected the operation of automatic stabilizers – higher unemployment benefits, for example, and a decline in tax payments due to lower incomes – and some came through cuts in tax rates and increases in discretionary spending. expansive fiscal policy served to raise deficits in most countries, some of which faced further costs from stabilizing financial institutions, pushing deficits even higher. sharp increases in deficits led in turn to escalating levels of government debt. bis central bankers ’ speeches policy during the recovery the combination of increasing debt and depressed output led to rising ratios of debt to gross domestic product ( gdp ) in many advanced economies and heightened concern about whether the growth in debt could be sustained without unsettling financial markets. as a result, early in the recovery governments began to withdraw fiscal stimulus, and, in most cases, fiscal policy became a net drag on economic growth. this outcome was most evident in the euro - area periphery, where skyrocketing bond yields and deepening concerns about default left governments with little choice about whether to rein in stimulus. in spain, for example, the oecd estimates that fiscal consolidation has subtracted an average of 1 – 1 / 2 percentage points from gdp growth each year since 2009. but fiscal policy also turned contractionary in countries facing less market pressure, such as the united kingdom and the united states. governments in both countries embarked on fiscal consolidation programs over the past four years, sharply reducing their structural deficits, and, as a consequence, creating headwinds that slowed the recovery. with fiscal drag weighing on growth and with private - sector deleveraging also holding back consumption and investment, monetary policy bore the brunt of supporting the economy. with policy rates at or approaching zero, central banks of necessity turned to unconventional policy tools such as large - scale asset purchases and enhanced forward guidance about the future path of policy rates. these unconventional tools have, in my view, served to support a recovery in domestic demand and, as a consequence, global economic growth. even so, the recovery in most advanced nations has proceeded more slowly than policymakers would have hoped