Taken together, these two sets of actions steadily raising the target range for the federal funds rate and steadily bringing down our securities holdings—should help bring demand closer to supply. In fact, even though we haven’t done either of these things yet, financial conditions have already responded based on the expectation of Fed action. For example, medium- and longerterm Treasury yields and fixed-rate mortgage rates have risen close to their December 2019 levels. Of course, our actions will be driven by the data and a determination to achieve our maximum employment and price stability goals. With these three factors working together to restore balance between supply and demand, I am confident we will achieve a sustained, strong economy and inflation at our 2 percent longer-run goal. For this year, I look forward to continued growth and receding inflation, both for the nation and North Jersey. Specifically, my forecast for the U.S. economy is for real GDP to grow a bit below 3 percent this year, for the unemployment rate to end the year around 3-1/2 percent, and 3/4  BIS central bankers' speeches  for PCE price inflationto drop back to around 3 percent, before falling further next year as supply issues continue to recede. Conclusion Since the onset of the pandemic two years ago, this has an extraordinary time for the economy and monetary policy.
A Swedish export company with income in dollars, but paying out wages and taxes in kronor, must exchange dollar income for kronor. The company transfers the foreign exchange risk to the bank, by selling dollars for kronor. This can be done in two ways: either the company sells the dollars when it receives them, on the spot market, or it sells its future dollar income as soon as it receives an order, on the forward market. In both cases the bank buys dollars and thus takes over the foreign exchange risk. The bank also makes a charge for doing this. Today the margins in foreign exchange trading are 0.02 per cent. The bank's foreign exchange risk thus increases, unless another client happens to make an equally large foreign exchange transaction in the opposite direction at exactly the same time, ensuring that the bank's holdings of various currencies remains unchanged. This is, of course, very unlikely. The export company's foreign exchange transaction therefore gives rise to several transactions between banks, with the aim of distributing the foreign exchange risk throughout the banking system. This means that the clients' purchases and sales of various currencies and in various banks are matched against one another, to avoid an increase in the total risk in the banking system. The first foreign exchange transaction will therefore lead to many new transactions before all of the banks have once again achieved a healthy level of risk taking.