While the goals for monetary policy are maximum employment and price stability, the economic decisions of households and firms generally don’t depend directly on the federal funds rate, since these parties do not participate in that market. Instead, their decisions depend on broader financial conditions, including the interest rates on home mortgages and corporate bonds, the performance of the stock market, and the foreign-exchange value of the dollar. As a result, for monetary policy to achieve its objectives, markets must function well enough to transmit the stance of policy, both from the markets in which the Federal Reserve directly transacts to its policy target, and then onward from that target to other money markets, and eventually to asset prices (bond yields, mortgage rates, equities, and exchange rates) that more directly affect real activity in the U.S. economy. Because the various money markets are important to achieving the Federal Reserve’s macroeconomic mandate, we monitor developments in them closely. In recent months, we have observed notable fluctuations in some term money market rates relative to the expected average level of the effective federal funds rate over the same horizon. This has been particularly true of the spread between three-month dollar LIBOR and equivalent-tenor expected future federal funds rates, as measured by overnight indexed swaps, or OIS, as shown in Figure 13, but is also the case with rates paid on borrowings such as commercial paper.
Some parts of the subregion sometimes have problems with floods, but in many parts there is permanent lack of even drinking water. Macedonia’s track record within the relations with the World Bank, can be assessed as quite successful. The World Bank has been one of the most important partners in the process of designing and implementing important structural reforms. The strong focus of the World Bank programs on the financial and the enterprise sectors, public administration, and business environment, has proved to be an important trigger and contributor to the productivity gains and real convergence of the economy. Personally, I am deeply grateful to the World Bank and the IMF for the contribution they have made in overcoming our existential problems. It is my personal opinion, however, that our need for the cooperation with and support of the World Bank is more than necessary. We have made some progress, but we have also encountered a lot of problems. The global crisis emphasized a number of structural issues that are bottleneck for the growth of the Macedonian economy. A comparative analysis shows that Macedonia has pretty low level of investments (on average about 15% of GDP during 1997–2007). Thus, further support which will lead to higher investments and higher stock of capital will play an important role for the long-term growth. We substantially lag behind those we want to keep up with. The unemployment rate is still staggering (32.4%).