For example, if the potential growth rate is 1 percent and the inflation rate is 2 percent, the interest rate neutral to economic activity will be 3 percent．In this case, against economic deterioration, there is room amounting to 3 percent for a central bank to stimulate the economy by reducing the interest rate.
Last month, the Federal Reserve Board submitted its semiannual report on monetary policy to the Congress. That report and my accompanying testimony covered in detail our assessment of the outlook for the U.S. economy. This morning, I would like to highlight some of the key aspects of the current economic situation.