As the recent instability illustrates, we economists still need to achieve as clear an understanding of the building blocks of financial systems – not simply the institutions small and large that populate them, but also the fundamentals of the rules and incentives that drive their behaviour; and, particularly, how they combine and interact with each other in the presence of amplification mechanisms stemming from leverage and other forces.
In January, the Committee noted that it anticipated that economic conditions were likely to warrant exceptionally low levels of the federal funds rate at least through late 2014 – a year and a half later than in previous statements.