##ciable accommodation should the ongoing expansion falter in the near term. in addition to taking the federal funds rate back down to nearly zero, the fomc could resume asset purchases and announce its intention to keep the federal funds rate at this level until conditions had improved markedly – although with long - term interest rates already quite low, the net stimulus that would result might be somewhat reduced. despite these caveats, i expect that forward guidance and asset purchases will remain important components of the fed ’ s policy toolkit. in addition, it is critical that the federal reserve and other supervisory agencies continue to do all they can to ensure a strong and resilient financial system. that said, these tools are not a panacea, and future policymakers could find that they are not adequate to deal with deep and prolonged economic downturns. as shown in figure 2, the 10 - year treasury yield in the simulation starts out at just over 4 percent, well below its level pre - crisis, suggesting that there may be less room to push down long - term interest rates in the future than in the past. another potential source of overstatement could be the frb / us assumption that changes in long - term interest rates, whether driven by shifts in term premiums or shifts in the expected path of short - term interest rates, have the same influence on real activity, as there is some empirical evidence that the estimated sensitivity of spending to movements in term premiums alone may be relatively small ; see michael t. kiley ( 2014 ), “ the aggregate demand effects of short - and long - term interest rates, ” international journal of central banking, vol. 10 ( december ), pp. 69 – 104. on the other hand, the effectiveness of forward guidance in the frb / us model is materially less than it is in some other models, implying that the frb / us simulation results could potentially understate the stimulus provided by the announcement of a lower - for - longer policy. see hess chung ( 2015 ), “ the effects of forward guidance in three macro models, ” feds notes ( washington : board of governors of the federal reserve system, february 26 ). in principle, the federal funds rate in the longer run could also turn out to be lower than currently predicted if inflation were to remain persistently below 2 percent. however, because a higher rate of inflation can arguably be achieved over time through a sufficiently tight labor market, this risk seems low to me as

reinvestment act is broad and deep. commenters across the board applauded the significant volume of cra loans and investments that have supported lmi households and communities, as well as the benefits households and communities have realized from the cra ’ s focus on local retail financial services, small business lending, and community development lending, investments, and services. and they asked that the three banking agencies work together toward a joint rulemaking proposal so that cra policies can be clearly and consistently applied across agencies. second, there are some good ideas about how to modernize the procedures for setting the area in which the agencies assess a bank ’ s cra activities while retaining the core focus on place. this is not a simple challenge, and this morning ’ s panel identified some promising solutions to the challenge of modernizing the definition of assessment areas to keep up with changes in banks ’ business models. i appreciated the panelists ’ insights on how to balance the importance of place with various business models, including to reflect the extensive use of digital channels and other changes in the banking industry. the public comments we have read so far suggest 1 / 3 bis central bankers'speeches general agreement that there is a need for an update — but not a complete overhaul — of assessment areas through a balanced package of reforms. we have heard general support for assessment areas that reflect each bank ’ s business model, recognizing that branch - based assessment areas work for many banks but that additional or different assessment areas may be appropriate for others. third, we have received helpful input on tailoring cra regulations to banks of different sizes and business models. many of the comments we reviewed expressed support for retaining different performance tests for different types of banks, including the strategic plan option. we also heard this at the regional roundtables, where banker participants ranged from small community banks to large internet - only banks. it was clear that cra regulations cannot be one - size - fits - all. fourth, we have heard some good suggestions for ensuring that any modernization of assessment areas should keep in focus the goal of encouraging banks to seek out opportunities in underserved areas, including in this morning ’ s panel on assessment areas. the concern about cra hotspots and credit deserts was echoed in the comment letters, and several commenters offered helpful suggestions for addressing this problem going forward. and the need to create incentives for cra capital to reach underserved communities was a theme we heard in our regional roundtables from both bankers and