William C Dudley: Update on economic and fiscal conditions in Puerto Rico Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, to the Association of Certified Public Accountants of Puerto Rico, San Juan, Puerto Rico, 24 June 2014. *  *  *  Good afternoon. I thank you for the opportunity to address your association. It is always a pleasure to speak with the different communities that make up the Second Federal Reserve District and it is especially gratifying to be here in Puerto Rico. As with other parts of our District, the New York Fed is dedicated to the people of Puerto Rico and to their future growth and prosperity. Our commitment is reflected in our ongoing work with our many partners in Puerto Rico. Over the past several years we have held three forums (cosponsored with the local Small Business Administration office, the Puerto Rico Small Business Development and Technology Center and the Federal Deposit Insurance Corporation), which provided technical assistance to help small businesses access capital, procure government contracts, and export their products and services. We also continue to promote financial literacy through our ongoing partnership with the Puerto Rico Bankers Association, and we have cosponsored the Financial Awareness Video Festival working with students at local colleges to produce short videos highlighting aspects of financial literacy. Let me just pause for a moment to say congratulations to this year’s winner: Pontificia de Ponce.
It is now widely accepted that these are determined by factors that are not directly affected by monetary policy, such as the rate of technological advances and the efficient functioning of various markets. In general terms, one can say that the policy conducted by the Riksbank is aimed partly at limiting the inevitable deviations from the inflation target and partly at ensuring that the real economy does not fluctuate excessively. The objective of monetary policy is price stability, but the Riksbank also considers real economy considerations to be important. This is characteristic of what is known as flexible inflation targeting, which as far as I know, is conducted by all central banks that have inflation targets. Monetary policy affects the economy with a certain time lag. Monetary policy decisions must therefore be based on forecasts of future inflation. Normally, monetary policy is aimed at achieving the inflation target within two years to avoid the deviations from target from being too large and too protracted. This two-year horizon can be regarded as a restriction that the Riksbank has placed upon itself as a means of upholding confidence in the inflation target. At the same time, it provides an opportunity to show consideration for the real economy.