##bulous concept that tends to go unattended. accepting that cultural change is a necessity, not a “ nice to do, ” is the first step in a long road that will require the participation of management, boards and every employee on your payroll. the culture within the organization will guide the behavior of employees, particularly when there are shades of gray. therefore, if organizational values and norms conflict with the rules or guidance you are required to follow, the organization is headed for trouble. the failure to understand the purpose of a law or regulation may lead one to adopt an overly technical or game - like approach to compliance. left uncorrected, this type of compliance arbitrage can fester and lead to micro - cultures lacking in respect for law. the recent enforcement actions addressing sanctions violations offer prime examples of this unfortunate and costly phenomenon. last week we hosted a workshop on “ reforming culture and behavior in the financial services industry ” at our offices downtown. based on the discussions among panelists and attendees, it was evident that industry participants have taken onboard the directive that cultural and behavioral change is needed in the industry. a number of firms have begun to implement programs that are at various stages of depth, breadth and maturity. there were a few key themes that emerged that i want to share with you today : • the role of regulation : there was a lot of discussion on the potential role of regulators and the public sector in developing and maintaining appropriate cultures at financial firms. while some voiced the opinion that regulators must play a role, others clearly indicated that trying to regulate something as dynamic and amorphous as culture would be counterproductive and would overstep the purview of regulators. i tend to agree. of course, regulation is one thing ; supervision is another. culture may not be amenable to official rulemaking, but it falls squarely within a banking supervisor ’ s responsibility for financial stability. financial institutions should expect greater supervisory attention to culture. • industry - led effort vs. first mover : using the united kingdom ’ s banking standards review council as an example, we believe that meaningful change will require an industry - wide effort. at the same time, the “ first mover ” issue fostered a general sense of skepticism around whether any firm would be willing to take on the risk of implementing a compensation structure, for example, that was dramatically different from others in the industry. also, as an industry, there must be a willingness to listen to the critics when developing

william c dudley : important choices for the federal reserve in the years ahead remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at lehman college, bronx, new york city, 18 april 2018. * * * it is a pleasure to have the opportunity to speak here today at lehman college. in my remarks, i will focus on the economic outlook — both over the near and longer term — and i will discuss some of the important monetary policy issues that will be considered in the years ahead, after my tenure at the federal reserve bank of new york is ( sadly ) over. as always, what i have to say reflects my own views and not necessarily those of the federal open market committee ( fomc ) or the federal reserve system. 1 the economic outlook over the near term, the economic outlook remains quite favorable. i anticipate that the economy will continue to grow at an above - trend pace in 2018 and 2019, which will put sufficient pressure on the nation ’ s resources to push up inflation to the fomc ’ s longer - run 2 percent objective. there are several reasons to be confident in this growth outlook : monetary policy remains accommodative, financial conditions are still easy, and the global economy is in the midst of a synchronized expansion. moreover, significant fiscal policy stimulus from tax cuts and increased federal spending will boost real household disposable income and corporate profits, which should support further gains in consumption and capital spending. in this context, i would not take much signal from the slowdown in consumer spending in the first two months of this year. as i see it, this slowdown was mostly due to two transitory factors : a retrenchment following the spurt in activity from recovery efforts following hurricanes harvey, irma, and maria, and the delay in this year ’ s tax refund payments to those receiving certain tax credits. 2 strong payroll employment gains also suggest that the slowdown in household spending will be temporary. over the last three months, payroll gains have climbed to a monthly pace of 202, 000 jobs, somewhat above 2017 ’ s monthly average of 182, 000. robust job gains coupled with moderate growth in labor compensation should ensure that household incomes will continue to rise at a solid rate, even before factoring in the impact of this year ’ s reduction in personal income taxes. with respect to inflation, most of the evidence is consistent with a slow movement toward the fomc