In a few moments, I will talk about how this growth abroad also presents an opportunity for Puerto Rico. The firming in economic activity, in short, is due both to natural healing and past and present policy support. In this regard, it is important to emphasize that we at the Federal Reserve have been expecting the economy to strengthen. We provided additional monetary policy stimulus via the asset purchase program to help ensure that the recovery regained momentum. A stronger recovery with more rapid progress toward our dual mandate objectives is what we have been seeking. This is welcome and not a reason to reverse course. Yet, we must not be overly optimistic about the growth outlook. The coast is not completely clear – the healing process in the aftermath of the crisis takes time and there are still several areas of vulnerability and weakness. In particular, housing activity remains unusually weak and home prices have begun to soften again in many parts of the country. State and local government finances remain under stress, and this is likely to lead to further spending cuts, tax increases, or job losses in this sector that will offset at least a part of the federal fiscal stimulus. Moreover, in recent weeks we have experienced several shocks from abroad that could have some impact on the economy’s forward momentum, at least in the short term.
This morning I will talk about economic conditions in the mainland and in Puerto Rico, paying particular attention to the developments since my visit last year and to the role of exports. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or the Federal Reserve System. Introduction to the New York Fed By way of introduction, let me start with a synopsis of what the New York Fed is, what we do, and what makes my job so interesting. The New York Fed is part of the Federal Reserve System, America’s central bank, which was created by Congress in 1913. With this act, Congress delegated to the Fed System its constitutional authority to manage the supply of money in the nation’s economy. Congress designed the central bank to be decentralized, representative of all regions of the country – including Puerto Rico and the Virgin Islands – and independent of the political process. The Fed System is comprised of the Board of Governors in Washington, D.C. – a federal agency currently led by Chairman Ben Bernanke – plus 12 regional Reserve Banks that span the country. For example, the district overseen by the New York Fed includes all of New York, the 12 northern counties of New Jersey; Fairfield County, Connecticut; Puerto Rico and the U.S. Virgin Islands. Each Reserve Bank is distinct, with its own charter and a board of directors drawn from its district, but overseen by the Board of Governors.