attentive to incoming data, especially on consumption, which point to a pick - up in growth this quarter. 2 in particular, consumer expenditures rose a strong 0. 6 percent in april, and auto sales edged higher in may. these are encouraging signs, but the data relevant for second - quarter growth are still relatively sparse. in general, demand growth in recent quarters has benefited from a relatively strong household sector – buoyed by a recovering labor market, reduced oil prices, and low interest rates – and has been pulled down by weak business investment and net exports. indeed, consumption and housing investment can more than account for the 2 percent increase in gdp over the past four quarters. by contrast, business investment and net exports together subtracted ¼ percentage point. the rise in the dollar and decline in foreign growth reduced demand for american exports, as well as profits and investment at u. s. firms, which were also adversely affected by declines in the price of oil. over the twelve months ending in april, manufacturing output increased only 0. 4 percent, while total industrial production, which also includes the drilling for, and extraction of, oil and gas, fell 1. 1 percent. although the most recent indicators suggest that weakness in investment and net exports has persisted into the current quarter, if the easing in financial conditions since mid - february and the recent firmness in oil prices were to continue, along with stabilization of the dollar, business investment and exporters would benefit. risks to the outlook of course, there are risks to the projection that future gdp growth will be strong enough to deliver progress on inflation and employment. most immediately, there is important uncertainty surrounding the united kingdom ’ s june 23 “ brexit ” referendum on whether to leave the european union ( eu ). the international monetary fund has noted that a vote in favor of brexit could unsettle financial markets and create a period of uncertainty while the relationship between the united kingdom and the eu is renegotiated. although the economic effects of this uncertainty and the costs of adjusting to altered trade and financial ties are difficult to quantify, we cannot rule out a significant adverse reaction to such an outcome in the near term, such as a substantial jump in financial risk premiums. because international financial markets are growth in gross domestic income ( gdi ) has not slowed as much as gdp growth recently. however, the average of gdp and gdi growth has still slowed recently from an average annual rate of 2 - 1 / 2

mark w olson : basel ii remarks by mr mark w olson, member of the board of governors of the us federal reserve system, at the annual washington briefing conference of the financial womena€™s association, washington, dc, 16 may 2005. * * * thank you for the opportunity to speak to you today about current status of the basel ii capital revisions. as most of you know, the u. s. banking agencies are working with their counterparts on the basel committee on banking supervision to develop and implement revisions to the original basel capital accord - also known as basel i - which was adopted in 1988. as we earnestly work to develop those revisions, it is instructive to recall the environment in which basel i was created. if we look back at the state of the banking and financial markets in 1988, it is clear that basel i was a major accomplishment. many countries had distinct, and considerably different, capital adequacy requirements. indeed, as banks conducted more and more business across borders, these differences raised significant competitive, if not safety - and - soundness, issues. it soon became clear that supervisors in the industrial countries would benefit from agreement on certain common definitions and minimum standards for regulatory capital. thus was born the first basel capital accord. two factors made basel i particularly noteworthy. first, it contained some common definitions of capital and risk - weighted assets that could be applied across countries. this was no small feat, since, as you know, different jurisdictions often apply a variety of definitions. by agreeing on common definitions, supervisors around the world were more readily able to depend on one another's assessment of capital adequacy without having to determine what the terms meant. second, basel i reflected agreement on what constituted a reasonable minimum ratio of capital to risk - weighted assets - the now - famous 8 percent. although some empirical work went into the derivation of this 8 percent, we should not pretend that this ratio was determined with scientific precision. it did, however, reflect the combined experience and knowledge of all the supervisors around the table. the four risk - weighting brackets, while equally imprecise, were the first efforts to differentiate risk exposures among categories of loan and investment assets. reasons for developing basel ii in looking back, i believe basel i, with its common definitions, common agreement on capital minimums, and the initial risk - weighting categories, has served the banking and financial community well. indeed, there is no reason to replace basel i for