In any event, the funding in currency other than home currency eventually depends heavily on funding conditions in the market. Such line of thinking suggests that it is extremely important that the foreign exchange swap market, which converts home currency into another country’s currency, is operating normally.
The factors I have just discussed are the usual sort that central bankers consider as economies move through a recovery. But a longer-term trend—slow productivity growth—helps explain why we don’t think dramatic interest rate increases are required to move our federal funds rate target back to neutral.