We therefore seek to minimize how far employment is from its long run normal level and inflation is from our longer-run goal of 2 percent on the PCE measure. Because monetary policy works with a time lag, we base policy not just on where the economy is today but where we expect it to be in the future. To do this, we make economic forecasts, based on data and insights from a broad range of economic models. We also take into account the balance of risks around our base case outlook. Looking ahead, in the absence of further monetary easing, I concluded that growth would remain too subdued over the next several years to make big inroads into the spare capacity that remains from the Great Recession. As a result, unemployment would remain unacceptably high, with economic risks skewed to the downside. Meanwhile, with substantial slack in labor markets and inflation expectations stable, inflation was likely to remain a bit below our 2 per cent longer-run objective. In this situation, I concluded that our policy framework means that further monetary policy easing was appropriate provided that the benefits of using the tools available outweighed the costs. In my judgment, this standard has been satisfied here. I am confident that the costs are manageable, based in part on the experience we have of using the tools these past four years and that the benefits substantially exceed the costs, recognizing, of course, that our actions are not so powerful that they will instantly transform the economic outlook.
Sometimes we have different views on the specific policy choices at hand, and you should view this as completely appropriate: these are hard questions – particularly during difficult economic circumstances such as we face today. In fact, I think we make better decisions as a committee because we don’t all think alike. But we are united in our commitment to our dual mandate of maximum sustainable employment and price stability and in our belief that preserving the independence of the Federal Reserve in making monetary policy decisions is very much in the public interest. That independence allows us to make tough decisions based on data and analysis insulated from short-term political pressures. BIS central bankers’ speeches  1  At FOMC meetings, each Committee member presents a current outlook for his or her region and for the nation. In formulating these assessments, we consult with many sources – our boards of directors, regional advisory councils, community leaders and other key stakeholders. My meeting with you and others today is part of this systematic effort to understand what is going on in the grassroots of our economy. To help me gather more information about our region, I met this morning with Fox Valve, a small business in Dover that manufactures specialized, highly engineered industrial parts. After that, I had the pleasure of participating in a roundtable discussion with members of the local MexicanAmerican business community. After this lunch, I will travel to Picatinny Arsenal to learn about its role in the state’s economic activity.