interest rates constrain the ability of monetary policy to offset negative shocks to the economy. this effect has been seen most clearly in the behavior of inflation. over the past decade, inflation in the united states has been below our 2 percent longer - run target most of the time, and measures of inflation expectations have drifted down. these declines in trend inflation and inflation expectations can create a pernicious feedback loop of reduced policy space and even lower inflation expectations. again, this experience is not unique to the united states, indicating that it stems from factors common across countries, rather than issues unique to our economy. indeed, most inflation - targeting advanced economies have struggled to achieve their inflation goals on a sustained basis over the past decade. this brings us to last week ’ s announcement and the issuance of a new consensus statement of our policy framework. it is a culmination of extensive outreach and conversations with communities and stakeholders across the country, careful and thorough analysis, and active 1 / 2 bis central bankers'speeches discussion and debate among committee participants. 4, 5 we took important lessons from the experience of the past decade, reassessed the evidence, and looked at the challenges ahead of us. all this effort was worth it : this new statement means we are better positioned to achieve our goals. in fact, the process worked so well, we ’ ve committed to repeating it roughly every five years! the new framework statement directly and effectively addresses the problems caused by a low neutral rate and persistently low inflation. first, it stipulates that, following periods when inflation has been running persistently below 2 percent, a temporary overshooting of the longer - run inflation target will likely be desirable to keep inflation and inflation expectations centered on 2 percent. second, it makes clear that we seek inflation that averages 2 percent over time, consistent with our longer - run target. finally, the statement makes unequivocally clear that we seek maximum employment and will aim to eliminate shortfalls from this broad and inclusive goal. these changes are mutually reinforcing and will meaningfully improve our ability to achieve both of our dual mandate goals in an environment of a very low neutral rate. i ’ ll conclude with this : the new framework represents both an important evolution in our thinking about how to achieve our goals and another step toward greater transparency. it reaffirms key aspects of the original statement that have stood the test of time and refines others in line with experience and evolving practices. it also makes

simon m potter : challenges posed by the evolution of the treasury market remarks by mr simon m potter, executive vice president of the markets group of the federal reserve bank of new york, at the 2015 primary dealer meeting, new york city, 13 april 2015. * * * i would like to thank michael mcmorrow for his excellent assistance in the preparation of these remarks and colleagues in the federal reserve system for numerous insightful comments and suggestions. welcome to this year ’ s primary dealer meeting, and thank you for joining us today. as primary dealers, you play an integral role as the federal reserve ’ s counterparties in operations to implement monetary policy, as participants in u. s. treasury auctions, and as important providers of information on market developments to support the desk ’ s monitoring of financial markets. 1 today ’ s meeting provides us with a valuable opportunity to communicate our expectations for you as our counterparties and to strengthen our important relationship. today, i ’ ll discuss the market for u. s. treasury securities, with a focus on how the market ’ s structure has changed in recent years. as you all know, the u. s. treasury market is one of the most important financial markets globally and is valued as a source of safety and liquidity. indeed, both domestic and global investors, including private sector institutions, retail investors, and foreign central banks, hold treasury securities at least in part for these reasons. a deep and liquid treasury market also helps to underpin the u. s. dollar ’ s status as the global reserve currency. i ’ ll begin with an overview of the market ’ s basic structure, including some historical perspective on how that structure has evolved over time. i ’ ll then turn more specifically to the subject of electronic and automated trading – a topic that has become increasingly important across many markets, including the market for u. s. treasuries. i will then review the intraday volatility witnessed on october 15 of last year. as you all know, october 15 was a highly unusual day in the treasury market, particularly given the very sharp round - trip in yields that took place mid - morning with no obvious immediate trigger. i will conclude with a few words on the updated best practice recommendations from the treasury market practices group ( tmpg ) in light of the changing market structure, and some observations on how you, as primary dealers, are expected to help promote the market ’ s efficiency and integrity. as always, the views i express