That stance combines an exceptionally low policy interest rate – the federal funds rate in a range of 0 to 25 basis points – with forward guidance indicating that this range would be appropriate at least as long as the unemployment rate remains above 6½ percent, inflation is projected to be no more than 2½ percent between one and two years in the future, and inflation expectations remain well anchored. Moreover, to support a stronger economic recovery, the FOMC is purchasing Treasury securities at a rate of $ billion per month and agency mortgage-backed securities (MBS) at a rate of $ billion per month, and has stated its intention to continue purchasing assets until it sees substantial improvement in the outlook for the labor market, conditional on ongoing assessment of benefits and costs. Combined, these actions are intended to ease financial conditions and thereby help to establish a selfsustaining economic expansion. Turning to recent developments, incoming data on the U.S. economy have been mixed of late. Based on the advance estimate, real GDP declined slightly in the final quarter of 2012, which was below the consensus expectations of an increase of around one percent. In addition, in January payroll employment rose by just 157,000, below the 200,000 average monthly gain in the fourth quarter, and the unemployment rate edged up to 7.9 percent. Offsetting these soft indicators, we see evidence beneath the surface that private demand firmed in the final months of 2012 and has been reasonably well maintained thus far this year.
During this long period of consumer retrenchment, only one form of consumer borrowing – student loans – consistently grew, and educational debt has now become the largest form of consumer debt, after mortgages. Student loans are widely held – roughly 39 million people have student loans, including a third of people in their 20s and 30s. For many of these families, educational debt is the tool that allows them to obtain higher education in spite of its large up-front cost. And higher education is, of course, the key to higher wages and a better standard of living. Nonetheless, student loans are not well measured or widely understood. BIS central bankers’ speeches  3  In the second presentation Donghoon Lee will describe the latest trends in the continuing growth in student loan debt and delinquencies, and their implications. Thank you. I will now ask Wilbert to give an overview of developments in household debt and credit conditions. 4  BIS central bankers’ speeches