the relative weakness of the owner - occupied market and strength of the rental market along with the potential for a gse - fha program to solve the problem of insufficient scale in some markets, conditions are unusual enough that it might also make economic sense to clarify existing expectations to recognize that in some cases converting a portion of residential reo to rental may be a reasonable option for financial institutions. depending upon the conditions in their individual markets, i believe having such an option could allow for better outcomes for institutions – that is, a superior net present value compared with traditional disposition approaches – and could at the same time contribute to market healing. however, to be effective in promoting better outcomes, such an approach would require supervisors to clarify current supervisory guidance to address how existing standards might apply to the valuation of real estate converted to rental, the time limits applicable to such holdings, and other aspects of managing those properties. financial institutions with large portfolios might be able to achieve scale in some markets on their own or possibly leverage the scale of a gse - fha program if such a program was created ; smaller institutions should also have the flexibility to act in accordance with the conditions in their local markets. responsible reo management in addition to the consideration of conversion strategies at significant scale, there are steps that all reo holders can take today to ensure that they are not contributing further to the problems. they can and should make sure that they are adequately monitoring any thirdparty vendors with which they contract to maintain, market, or sell reo properties. certainly, the recent interagency review of servicers revealed the severe consequences that can result from failing to monitor third - party vendors. before converting reo properties to rental, reo holders could also consider “ first look ” types of programs to enable owner - occupants, public entities, and nonprofits windows of time to bid on available properties. a number of institutions have used such programs with successful results. and reo holders who sell large numbers of properties to investors should consider processes, such as those used by the gses, to screen and monitor bulk investors to reasonably assess their probable actions regarding maintenance and disposition after acquiring the properties. low - value properties so far i ’ ve talked solely about reo - to - rental as a solution for reo properties. but that ’ s not going to work everywhere. in particular, some properties are too damaged, or otherwise too low - value, to be sold as owner - occupied units or profitably converted to rental properties

these assessments of maximum employment are necessarily uncertain and subject to revision. according to the federal reserve act, the employment objective is on an equal footing with the inflation objective. as a practical matter, our current strategy shares many elements with the policy framework known in the research literature as “ flexible inflation targeting. ” 15 however, the fed ’ s mandate is much more explicit about the role of employment than those of most flexible inflation - targeting central banks, and our statement reflects this by stating that when the two sides of the mandate are in conflict, neither one takes precedent over the other. we believe this transparency about the balanced approach the fomc takes has served us well over the past decade when high unemployment called for extraordinary policies that entailed some risk of inflation. the review of our current framework will be wide ranging, and we will not prejudge where it will take us, but events of the past decade highlight three broad questions. three questions the first question is, “ can the federal reserve best meet its statutory objectives with its existing monetary policy strategy, or should it consider strategies that aim to reverse past misses of the inflation objective? ” under our current approach as well as that of many central banks around the world, the persistent shortfalls of inflation from 2 percent that many advanced economies have experienced over most of the past decade are treated as “ bygones. ” this means that for a discussion of this terminology and references, see english, lopez - salido, and tetlow ( 2015 ) and clinton and others ( 2015 ). - 7policy today is not adjusted to offset past inflation shortfalls with future overshoots of the inflation target ( nor do persistent overshoots of inflation trigger policies that aim to undershoot the inflation target ). central banks are generally believed to have effective tools for preventing persistent inflation overshoots, but the effective lower bound on interest rates makes persistent undershoots more likely. persistent inflation shortfalls carry the risk that longer - term inflation expectations become poorly anchored or become anchored below the stated inflation goal. 16 in part because of that concern, some economists have advocated “ makeup ” strategies under which policymakers seek to undo, in part or in whole, past inflation deviations from target. such strategies include targeting average inflation over a multiyear period and price - level targeting, in which policymakers seek to stabilize the price level around a constant growth path. 17 these strategies could be implemented either permanently or as a temporary response to extraordinary circumstances.