Second, if the zero interest rate policy continues for a long period even after the economy clearly recovers, more economic agents will tend to conduct activities based on the expectation that current extremely low interest rates will be sustained indefinitely. This is what happened in the bubble period, leading to an enormous waste of resources which continues to inflict pain on us today.
The Federal Reserve faces considerable challenges today in meeting the responsibilities that you have given us: for fostering price stability and maximum employment at a time of rapid change in the U.S. and global economies; for helping maintain a safe and sound banking system and stable and efficient payments and financial systems in the face of innovations in financial instruments and institutions; and for protecting and educating consumers as they take advantage of the greater variety and sophistication of financial instruments available to them.