And, on the price front, they note that the disinflationary pressures of 2009 and 2010 have given way to inflation rates closer to what I and the majority of Fed policymakers see as the Fed’s objective of 2%. These considerations lead many to say that when adding up the costs and benefits of further accommodation, the risk of over-shooting our inflation objective through further policy accommodation exceeds the potential benefits of speeding the improvement in labor markets. I would argue that this view is extremely, and inappropriately, asymmetric in its weighting of the Fed’s dual objectives to support maximum employment and price stability. Suppose we faced a very different economic environment: Imagine that inflation was running at 5% against our inflation objective of 2%. Is there a doubt that any central banker worth their salt would be reacting strongly to fight this high inflation rate? No, there isn’t any doubt. They would be acting as if their hair was on fire. We should be similarly energized about improving conditions in the labor market. In the United States, the Federal Reserve Act charges us with maintaining monetary and financial conditions that support maximum employment and price stability. This is referred to as the Fed’s dual mandate and it has the force of law behind it. The most reasonable interpretation of our maximum employment objective is an unemployment rate near its natural rate, and a fairly conservative estimate of that natural rate is 6%.
The outlook for the Spanish economy over the next few years According to the latest economic projections published by the Banco de España, the upswing is expected to continue until 2019, although activity will tend to slow on account of, among other factors, the less expansionary fiscal policy stance and steady or rising prices for oil and other commodities, which are expected, in any event, to be higher than over the last two years. With regard to the composition of spending, the less expansionary fiscal policy stance and the squeeze on the income of resident agents, resulting from the rise in inflation associated with the increase in energy prices since early 2016, will somewhat reduce the growth of private domestic demand. Net external demand will continue to make a small positive contribution, against a background in which exports are expected to remain dynamic while imports remain relatively weak. The risks surrounding the central scenario The favourable outlook for economic activity I have described is subject to risks originating essentially in the external environment. First, although there has been an improvement in the outlook for world activity and trade, it has been accompanied by an increase in global uncertainty stemming from the greater strength of restrictive positions on trade, migratory movements and international policy coordination, in the area of financial regulation, for example. Second, we should not forget that, despite the significant progress made in deleveraging in recent years, our level of debt is still high.