and jing cynthia wu ( 2012 ), “ the effectiveness of alternative policy tools in a zero lower bound environment, ” journal of money, credit and banking, vol. 44 ( february supplement ), pp. 3 – 46 ; diana hancock and wayne passmore ( 2012 ), “ the federal reserve ’ s portfolio and its effects on mortgage markets, ” finance and economic discussion series 2012 – 22 ( washington : board of governors of the federal reserve system, june ) ; and carlo rosa ( 2012 ), “ how “ unconventional ” are large - scale asset purchases? the impact of monetary policy on asset prices, ” federal reserve bank of new york staff reports 560 ( new york : federal reserve bank of new york, may ). bis central bankers ’ speeches costs of lsaps what of the potential costs or risks of the asset purchases? a variety of concerns have been raised over time. with inflation in check, the most important potential risk, in my view, is that of financial instability. one concern is that our policies might drive excessive risk - taking or create bubbles in financial assets or housing. a related worry is that the eventual process of reducing purchases and normalizing the balance sheet may itself be destabilizing or disruptive to the economy. indeed, recent volatility in markets is in part related to concerns about the possibility of a reduction in asset purchases. i ’ ll address both of these broad concerns, starting with incentives for risk - taking. monetary policy has helped to keep real interest rates low. while longer - term real rates have turned positive in recent weeks, they remain at historically low levels. experience suggests that low real rates, if maintained for a long time, can lead to asset price bubbles and eventually to financial instability. but low rates are not solely or even primarily a result of the federal reserve ’ s accommodative monetary policies ; they are rooted in the market ’ s expectations of low inflation and the weakness of the economic recovery, factors weighing on rates not just in the united states but throughout the advanced economies. 6 given low real rates and low inflation, expected nominal returns should be low across all asset classes. the concern would be that these conditions, and our policies, could be encouraging irrational expectations of high returns. is there any sign of that now? by most measures, equity valuations seem to be within a normal range. whether one looks at trailing or forward price - to - earnings ratios, equity risk premiums, or option prices, there is little

vast array of information we have at our disposal. of course, that includes the standard econometric toolkit. but we have also been increasingly relying on text analytics and machine learning. 1 / 3 bis - central bankers'speeches as a result, this conference is highly relevant for us at the federal reserve, and likely those at other central banks as well. more timely and accurate information and improved methodological techniques permit federal reserve staff to produce better estimates of the evolving economic outlook, which allows policymakers to make moreinformed decisions. it is reassuring to know that the use of these nontraditional data and techniques for academic research and for policy is no longer in its infancy. the breadth and depth of studies captured in the agenda display the material inroads of these data and methods into economic research. i am pleased to see colleagues and important contributors to this field on the conference program. jed kolko, julapa jagtiani, arthur turrell, and hal varian will discuss issues related to the opportunities and challenges for government and privatesector institutions in response to nontraditional data, machine learning, and artificial intelligence. similarly, an academic panel with jesus fernandez - villaverde, sydney ludvigson, stephen hansen, and chiara farronato will discuss how these data and methods have helped push the research frontier in subjects ranging from macroeconomic modeling to online markets. as i noted in recent remarks, there has been a surge in excitement and trepidation about generative ai. 3 the range of social effects from this new technology could be broad. jack clark, one of the co - founders of anthropic, will soon offer a keynote, and i am sure we are all looking forward to hearing his insights on the practical applications of this new ai technology and the potential use cases for economic research and policymaking. i am especially interested in seeing progress on " explainable ai, " which can bridge the divide between the technical sphere and users. i am looking forward to any discussions on this area. these generative ai tools could also have implications closer to home, as they may influence how we conduct central bank communications. there is a growing literature that uses natural language processing techniques to discern how communications by central bankers are perceived by the news media, and, in turn, how that influences financial markets. the presentations by christopher neely, clara vega, xin zhang, and xu zhang will discuss the state of the art on this subject, which