One thing that makes my job even more interesting is that New York has some roles unique within the Fed. For example, the New York Fed is the Reserve Bank charged with implementing monetary policy. This means that at the direction of the FOMC, we buy and sell Treasury securities. We are also the eyes and ears of the Fed on Wall Street, and we supervise many of the largest financial institutions in the country. We operate Fedwire® – the conduit for large money transfers between banks. And, we provide banking services to the U.S. Treasury, and central banks and governments from around the world. Finally, I must mention that the New York Fed’s district could be the most diverse in the System: ranging from the urban density of New York City to the forested sparseness of the northern Adirondacks, to here in the Caribbean island of Puerto Rico. All in all, there is a lot to keep my colleagues and me quite busy – even in normal times. U.S. economic outlook Now, what is the outlook for economic activity, employment and inflation on the mainland? In particular, what are the areas of vulnerability that we should be most concerned about? I am pleased to say that the economic outlook for the mainland has improved in the past six months. Despite this, we are still very far away from achieving our dual mandate of maximum sustainable employment and price stability. Faster progress toward these objectives would be very welcome.
Meanwhile, the amount of money that households need to service their debt (for mortgages, cars, credit cards) has fallen sharply to levels that prevailed during the mid-1990s. Debt service has been pushed lower by a combination of debt repayment, refinancing at lower interest rates and debt write-offs. Financial institutions have strengthened their balance sheets by retaining earnings and by issuing equity. Bank lending standards, while still tight, have begun to ease somewhat. As a result, some measures of bank credit are beginning to expand again. Second, monetary policy and fiscal policy have provided support to the recovery. On the monetary policy side, we at the Fed have maintained unusually low levels of short-term interest rates and engaged in large-scale asset purchases. These measures have fostered a sharp improvement in financial market conditions. On the fiscal side (that is, government spending and taxation), the economy has been supported by the shift in policy to help support growth. In particular, the temporary reduction in payroll taxes could have a strong impact on growth during the first part of this year. Third – and very much linked to the topic of this meeting – is growth abroad. Much of the rest of the world – especially the emerging market economies – have been growing strongly. This growth has led to an increase in the demand for U.S.-made goods and services. Over the four quarters of 2010, real, or inflation-adjusted, exports rose 9.2 percent. All told, real exports accounted for about 40 percent real GDP growth in 2010.