the united states — has declined to half a percent. 3 that ’ s about 2 percentage points below the average natural rate that prevailed in the two decades before the financial crisis. a striking aspect of these estimates is that they show no signs of moving back to previously normal levels, even though many advanced economies have fully recovered from the crisis. this poses significant challenges for monetary policy. when interest rates are low, central banks don ’ t have much room to maneuver to deal with a crisis. they will only be able to cut interest rates by a small amount before they hit zero — or as economists call it, the “ zero lower bound. ” of course, central banks can, and have, used negative rates to stimulate growth, but they bring with them a separate set of challenges. the result is that future recoveries will be slow, and slow growth is usually characterized by low inflation. persistently low inflation creates a vicious circle, where expectations of low inflation drag down current inflation. if inflation falls, central banks will have even less room to maneuver when faced with a slowdown. 4 a fresh approach all this begs the question : what can we do to prepare ourselves and our economies for the next 2 / 3 bis central bankers'speeches crisis? there ’ s no single silver bullet that can solve these challenges. but changes to monetary, fiscal, and other economic policies could all help us become more resilient. starting with monetary policy, central banks should reassess their strategies, goals, and the tools they use to achieve them. 5 this might include things like reassessing how we achieve our 2 percent goal. outside of monetary policy, there are a number of ways fiscal policy can support an economy. one is to strengthen the “ automatic stabilizers, ” which, in a downturn, reduce taxes without legislation to stimulate growth. another is to use regulation to enhance financial stability. finally, fiscal and other economic policies can attack the sources of slow growth and low r - star directly. demographics are not an area where most economists, or policy makers, want to meddle — and i ’ m certainly not going to stand here and say people should stop living so long! but there are things we can do to improve long - run growth. these include raising public and private investment in human and physical capital, infrastructure, and science and technology, as well as removing barriers to participation in the labor force and the economy more broadly. it ’ s impossible to predict the future. but we can

deal with the present. the economic environment in which we operate today is a direct consequence of the demographic and productivity shifts taking place. low neutral interest rates are very real, and they ’ re here to stay. conclusion the facts have changed, and so it is time to change our minds also. it is often said that change is hard. but, experience teaches us that it is better to prepare for the future than wait too long. ultimately, failure to prepare often means preparation for failure. 1 united nations, world populations prospects : key findings and advance tables, 2015 revision. 2 antonin bergeaud, gilbert cette, and remy lecat, productivity trends in advanced countries between 1890 and 2012, review of income and wealth, volume 62, issue 3, pp. 420 – 44, september 2016. 3 shigeaki fujiwara, yuto iwasaki, ichiro muto, kenji nishizaki, and nao sudo fujiwara, developments in the natural rate of interest in japan, bank of japan review, october 2016 ; kathryn holston, thomas laubach, and john c. williams, measuring the natural rate of interest : international trends and determinants, journal of international economics, volume 108, supp. 1, pp. s59 - s75, may 2017. 4 thomas m. mertens and john c. williams, tying down the anchor : monetary policy rules and the lower bound on interest rates, federal reserve bank of san francisco, working paper series, may 2019. 5 richard h. clarida, vice chair of the board of governors of the federal reserve system, the federal reserve ’ s review of its monetary policy strategy, tools, and communications practices, speech delivered at the federal reserve bank of minneapolis, april 9, 2019. 3 / 3 bis central bankers'speeches