from bloomberg world headquarters, these are the top stories on the bloomberg. frome awaiting remarks janet yellen as she prepares to deliver the keynote address at an abe in cleveland. what she is likely to say about growth and global economies. the president welcome the spanish prime minister at the white house today. the issues they will likely discuss as the president a long list of critical issues here and abroad it. princetoneak to the university professor about a recent op ed on the obamacare repeal effort. first, julie hyman is with us. we are halfway through the trading day.

are stalling out here after a little bit of a rebound earlier from yesterday's losses. sideways movement as of now. some interesting takeaways as you take a step act. one of the metrics we are looking at is on the bloomberg terminal. u.s. households owning shares of bonds are as of june 30. the prior record was 128.4% act in march 2000. that is when the internet bubble popped. berg is sounding the alarm this time. he wrote a report that this metric is a caution sign for the u.s. market. that is something to continue to watch here.

there is a lot of stock relative to gdp. back the markets, we have some individual movers. operators,line carnival came out with its earnings. bookings have been so strong this year the company will be able to withstand impact of hurricanes irma and maria. harvey was in the prior quarter. harvey and maria will be in the current quarter. this may affect the numbers going forward. the prior quarters this year have an quite strong for the company. earnings on the low-end are going to be at least 364 per share. 360 was the forecast. we are looking at the restaurant industry. darden is leading declines. the all of garden is not doing as well for the company. i want to take you back to 2014. darden had that proxy battle with them. among the recommendations, one

was to sell the pasta. companyake of that, the had an up take at all of garden. it had a come back here in it had a little bit of a hiccup last order. what analysts had been projecting. vonnie: thank you for that trade up take. a chicago is becoming national health. they are trying to get more into the factor. kevin cirilli set down with the mayor. they talked about the opening of the countries new building at trump tower and the plan to add 2000 chicago job.

>> i am very proud of what we are doing at outcome health. that is a plan to grow 2400 jobs. the space is going to be available for startups. they're going to start their company. complement the knowledge. at one point, we are a startup. other entrepreneurs who are capacity to have talent and lincoln, he knows where he was. i hasn't forgotten that area think it's a tremendous statement to the culture we haven't chicago, which is competitive. we are also a community making sure others have the chance to make a go it reading

entrepreneurs and successful in the health care space. kevin why did you choose chicago? it really takes an ecosystem to transform health care. you cannot build a company that is going to change health care. you have to work with providers. you have to work with payers. you have to work with our great research university. you can being of these important stakeholders and get angst on it together. it's a place that talent want to come to. we recruited great talent from salesforce, facebook, all sorts of ladies -- leading companies from london and out west. chicago is where they want to be. a lot of it has to do with the ecosystem forming here. we believe that if you look at the long game, if you look at 10 years from now. health care is going to be one of the next things that changes.

>> one of the things you have to look at and the outcomes health whether that is unique, it is the patient or the provider or the payment, all of the big establishments are here. five of the 15 top 18 hospitals are in chicago. when you put all that together, we are perfectly sitting. some of the equities and health care are based here. chicago is situated to take advantage of institutional strength, entrepreneurship, and the talent that wants to come live in the city and work in the city and play in the city. the space is right for knowledge and disruption in a tremendous

way that has social benefit. kevin: we have talked about what investors are looking for in health care. there is so much noise coming out of washington dc. i hear it every day. things,talk about these how to set up -- does that impact you? believef the things we is it's easy to think we're going to change health care bylaws or software. one of our core beliefs and this is why we are based in chicago is in order to change health care, you must go into the ground game. you have to go into the exam rooms. you have to make sure doctors and patients have all the information and intelligence they need to make the best possible decision. you have to work with others. we are focused on how the life

science companies and pharmacies provide resources to doctors and patients. >> one is not only are the major ,edical association based here a year from now we are opening up our first major investment in a medical research and are that is based here in chicago. we have over 2500 people doing research in pharmaceuticals and medical devices. i joked when i left president obama's. i said i never want to work in health care again. the first thing on the edge it was health care for us. our health care cost have flattened. we have the largest wellness plan in the united states, all 32,000 public employees.

also are in the midst of making sure we are smarter about how the patient, the provider, and the payment system works. people make the right choices and understand health care has a set of choices. that depends on what they do. you make of what they are doing? >> on one level they are throwing a lot of uncertainty that doesn't need uncertainty. impact startup impact startup companies that are looking at establishment and looking for cost savings and better outcomes. i am one of the largest employers in the state of illinois. be dealinggoing to with that.

bill, there is another that is amazon. are there any developments with that deadline coming up submit? >> this is a city in the middle of america. it's the second-most competitive economy in north america. talent, transportation, training, technology. he came to northwestern and started a company. kevin: heavy told this to jeff bezos.

companies whether you are a startup or amazon,. shery: let's check in with first word news. trump will visit puerto rico next week and he announced this after the administration, under fire for the response to the damage that is home to 3 million american citizens. next tuesday is the earliest you can visit. he said he may also visit the u.s. virgin islands. madet talks have not yet sufficient process to move on to the second stage desired by britain. he is cautiously mystic that the negotiations can move forward. after meeting with reddish prime

minister, he says britain had eating --a sense of having cake and eating it too. delivered president proposals for reshaping europe at the sorbonne. french willopen the a terry to european soldiers and proposed other states to the same thing on a voluntary basis. he proposed the creation of a european intelligence academy to better fight terrorism. hillary clinton is criticizing president trump for what she considers a double standard by her former rival. nationalabout the football league with charlie rose. >> he goes after lack athletes who are standing up for what a believe.

fired, calls them a so b's. to whitet do that supremacist and neo-nazis or vladimir putin. he is very strategic about who we attacks. allowednding a message, dog whistle to his supporters. we are still on the same wavelength. watch the entire hillary clinton interview with charlie rose tonight on bloomberg television. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. shery: thank you. coming up, puerto rico is appealing to congress to avoid a humanitarian crisis in the wake of hurricane maria. this is bloomberg. ♪

shery: this is bloomberg markets. vonnie: puerto rico is still in the dark. this is the sixth day in the aftermath of hurricane maria. is worseningcture the debt crisis. donald trump will be going to put rico next tuesday. for more, michele covers puerto rico for bloomberg news. it's very bad, it's very serious. they are trying to restore power

throughout the island. we are talking about hospitals and nursing homes running on generators. it's very bad, it's very serious. even a children's hospital is struggling to wind fuel for the generators. they need help. they are waiting. the streets are flooded area shery: how much relief are they getting? michelle: fema is down there on the ground. there are national troops on the ground. federal officials are down there. theave yet to hear from world government how much money and from congress how much money will be handed over. vonnie: is there anything more than an be done quicker? assistanceke medical to these people suffering days. michelle: fema is working on that. the main way to get to the island is to the seaport in the airport. that is the focus right now.

getting that transportation going. shery: we are getting live pictures right now of president trump heading into the oval office with the prime minister of spain. they are expected to discuss a number of issues. vonnie: she is not going to be tending the eu crisis -- so it because of the catalonia crisis. let's get back to puerto rico. how difficult will it he for puerto rico to get out of its economic problems? they are dealing with a bankruptcy. how much further could this recovery be further away? michelle: resolving the that pay, thatt they can't is going to take longer to resolve. investors might need to wait

longer for their money. vonnie: i guess that's what investors do. sometimes it has been called that in the past. if it looks like the bankruptcy is getting bigger. michelle: they will need to wait longer for the recovery. the investors are basically saying we need to be compensated things are decreasing to late -- today as well. shery: we do have a chart on the bloomberg right now to show you the prices of the bonds declining. michelle: hopefully there will be some leveling off at some

point in this is bad not only for on holders, it's bad for puerto rico as well. vonnie: thank you so much for joining us today. mention breaking stories. federal prosecutors are holding a news, rinse. under investigation into kick backs in college basketball. coaches andlve financial advisors and representatives of's ports where companies, including adidas. toy steered young athletes powerhouse schools. you can watch the full news conference on bloomberg. still ahead, the deal that just got announced another

huge blockbuster. toshiba is going to sell its memory chip business. this is bloomberg. ♪

vonnie: this is bloomberg markets. shery: in the deals report, they are persuading apple to switch sides and joined the private equity firm in a bid for toshibas flash memory chip does this. this is the latest deals report. this is ongoing for months and months. it looks like game of thrones, alliances he made. alex: this is been going on for so long now. digital, which has aligned itself with this kkr group trying to woo apple, they have come forward and said we

are owing to file an injunction. if toshiba moves ahead with this announced plan to sell its memory chip business to the bain capital consortium, which is the rival bidder to the kkr consortium. pain has worked hard to get apple on board. $7y when apple to kick in billion in money and debt capital. recruited dell and other companies to try to shore up its bid against western digital. you can take a step act for people who have not been following this. toshiba got into a lot of financial difficulty earlier this year, late last year when it's nuclear business was starting to struggle. they realized they were going to have to sell the memory chip business. they did not want to sell the entire thing. they came to the conclusion they were going to actually have enough financial support to move

forward as a company. they were going to have to sell the entire thing you now they want to sell to a private equity firm. this memory chip business, which sellsreat business which parts for the iphone, they could still have some ownership in their from toshiba. we thought maybe we got a deal done with the pain consortium. the threat of litigation with western digital has scared off apple from signing off on the final terms. we don't know why apple has agreed to the final terms yet area kkr is trying to say join our bid, we have western digital backing. they are not technically part of that and source him. kkr has alliance with western digital. they have said we will come up with new terms on an agreement. kkr is making the pitch to apple. we don't know where things

stand. it seems to be changing my the hour. shery: that is also a big problem. thank you so much for joining us. latest obama care repeal is stalled. we will be joined by him, the economic professor at princeton. we have his thoughts on the senate republican health care bill. we will also talk about what to, of monetary policy. coming up next, this is bloomberg. ♪ what did we do before phones?

they save us from getting lost, getting hungry, and getting tired of places like this. phones changed everything - shouldn't the way pay for them change too? introducing xfinity mobile. where you can pay for data by the gig, and share it across all of your lines. no one else lets you do that.

see how much you can save when you pay by the gig. xfinity mobile. it's a new kind of network designed to save you money. call, visit, or go to xfinitymobile.com. vonnie:vonnie: that is a lovely picture of midtown manhattan. that is where we are live from bloomberg world headquarters. i'm vonnie quinn. shery: this is "bloomberg

markets." vonnie: let's get a check on the major averages. not that much movement today. the dow is up 11 points. s&p 500 24. nasdaq up 1/10 of 1%. when it comes to other asset capital, just a little bit more market reaction. the yen weaker today. that is on a stronger u.s. dollar for the main part. the yield curve, 79 basis points. slackening all the while as the shorter end of the curve moves up. at 51 88 a barrel. there is still a good seven dollars of a spread between wti and grant. gold future is holding above $1300 an ounce even though we are in a down session. let's get to the first word news . mark: pyongyang is at odds with president trump's reasoning or motives, and has reached out to

republican linked analyst to help figure him out. that is according to the washington post. the washington post also reports the outreach started before the current eruption of threats between mr. trump and kim jong-un, but will likely intensify with the escalating rhetoric. says hefinance minister wants clarity when it comes to the u.k. leaving the european union. brexit hope that the negotiations get on on a straight course, with a clear roadmap. because this is what we need to what we do not need his further uncertainty in europe. mark: he made the comment in an interview with francine lacqua in milan. secretary of state rex tillerson is meeting with cuba's foreign minister today as an ongoing investigation continues into mysterious attacks on american diplomats in savannah.

at least 21 u.s. diplomats have suffered physical symptoms including brain damage and hearing loss since late last year, as a result of what tillerson has described as health attacks. u.s. officials believe the attacks may have been carried out with some sort of sonic device, but have been unable to determine the cause or who was behind them. cuba has denied any knowledge or involvement. in alabama, voters are heading to the polls for a special senate election for the seat once held by attorney general jeff sessions. president trump is supporting senator luther strange, tweeting this morning that strange has been shooting up in the alabama polls in his words, since my endorsement. --ish the job, but today, or for big luther. strange as being opposed by roy moore, known for publicly displaying the 10 commandments and opposing gay marriage. global news, 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries.

i'm mark crumpton. this is bloomberg. vonnie: thank you for that. janet yellen is speaking at the national association for business economics and cleveland. you can watch this conference and fall on the bloomberg. type in live ago. because changes and interest rates influence economic with ay and inflation substantial lag, the federal open market committee sits monetary policy with an eye to its effects on the outlook for the economy. but the outlook is subject to considerable uncertainty for multiple sources. and dealing with these uncertainties is an important feature of policymaking. insurgenciesrent are these for -- sources driving inflation, which has remained low in regent years -- recent years.

low will discuss, this inflation likely reflects factors whose influence should fade over time. but as i will also discuss, many uncertainties and downward pressures on inflation could prove to be unexpectedly persistent. my colleagues and i may have misjudged the strength of the labor markets, the degree to which longer run inflation and expectations are consistent with our inflation objective, or even the fundamental forces driving inflation. in interpreting incoming data, we will need to stay alert to these possibilities. and in light of incoming -- adjust ourt views about inflation, the overall economy, and the stance of monetary policy best suited to promoting maximum employment and price stability.

let me begin by reviewing recent inflation developments in the economic outlook. as the solid blue line in figure one indicates, inflation as measured by the price index for personal consumption expenditures has a generally run below the fomc's 2% longer run objective since that goal was announced in january 2012. out inflation, which strips food and energy prices, has also fallen persistently short of 2%, the red -- line. furthermore, both overall and core inflation, after moving up appreciably last year, have slipped against -- again in recent months. sustained low inflation, such as this, is undesirable. other things, it generally leads to low settings of the federal funds rate in

normal times. thereby providing less scope to ease monetary policy to fight recessions. addition, a persistent undershoot of our stated 2% goal could undermine the fomc's credibility, causing inflation expectations to draft and actual inflation and economic activity to become more volatile. as noted in its recent statement, the fomc continues to anticipate the with gradual adjustment in stance of monetary policy, inflation will rise, and stabilize at around 2% over the medium term. this expectation is illustrated by the green stars, which represent the mediums of the inflation projections submitted by fomc participants at our meeting last week. in part, this expectation reflects the significant improvement in labor market

conditions over the past few years. as shown in figure two, the unemployment rate, the blue line, now stands in 4.4%. somewhat below the median of fomc participants estimates of its longer run sustainable level, the black line. indicate,en stars labor market conditions are expected to strengthen a bit further. the inflation outlook also reflects the committee's judgment that inflation expectations will remain reasonably well anchored at a level consistent with pce price inflation of 2% in the long run, and that the restraint imposed in recent years by a variety of special factors, including movements in the relative prices of food, energy, and imports, will wayne in coming quarters. the assessment, it

is useful to decompose the forces driving movements in inflation since the financial crisis, as estimated using a simple model of inflation that i presented in this speech two years ago. this figure reports the decomposition as of the contributions made by various factors to the shortfall of pce price inflation from 2% year-by-year. as illustrated by the purple dotted portion of the bars, labor underutilization, or shrinkingounts for shares to shortfall since 2012 a negligiblead effect. by comparison, the influence of changes and relative food, energy, and import prices, they solid blue and a checkered red

portions, has been more substantial in the past few years. their contribution is estimated to have greatly diminished this year. not surprisingly, the simple model, this account for all the year-to-year movements in inflation, as indicated by the green striped portion of the bars, the residual components of the shortfall was modestly positive on average from 2008 through last year. this year, however, inflation has been unexpectedly weak from the models perspective. error doeslly large not necessarily imply that inflation is more likely to continue to come in on the low side in coming years. some of the recent decline in inflation, although not all,

reflects idiosyncratic shifts in the prices of some items, such as the large decline in telecommunications service prices seen earlier in the year that are unlikely to be repeated. --green dashen -- the consumers, if prices encapsulated including items whose price changes are outliers on both the high and low side, the resulting trimmed mean measure of inflation shows less of a slowdown this year. sort,on analyses of this my colleagues and i currently think that this year's low inflation is probably temporary. so we continue to anticipate that inflation is likely to stabilize around 2% over the next few years. but, our understanding of the

forces driving inflation is recognize thate something more persistent may be responsible for the current undershooting of our longer run objective. accordingly, we will monitor incoming data closely and a stand ready to modify our views based on what we learn. although we judge that inflation will most likely stabilize around 2% over the next few years, the odds that it could turn out to be noticeably different are considerable. this point is illustrated by figure five. here, the red line indicates the median of the latest inflation projections submitted by fomc participants that i showed previously. of thisinent feature figure is the blue shaded region which showsed line, a 70% confidence interval around

fomc participants meeting outlook. the width of this region reflects the average accuracy of inflation projections made by private and government forecasters over the last 20 years. , based onure shows that history, there is a 30% probability that inflation could be greater than the 3% or less than 1% next year. most of this uncertainty oflects the influence unexpected movements in oil prices and the foreign exchange value of the dollar, as well as that of idiosyncratic developments on related to broader economic conditions. these factors could easily push overall inflation notably above or below 2% for a time. such disturbances are not a great concern from a policy they fadee because

away as long as inflation expectations remain anchored. to this reason, the fomc strives to look through these transitory inflation affects when the setting voluntary -- monetary policy. such was the case when rising oil prices pushed headline inflation, notably above 2% for several years prior to the financial crisis. similarly, they committee substantially discounted the reduction and inflation that occurred from 2014 through 2016 as a result in the decline of oil prices and the effects of the dollars appreciation on import prices. a more important issue from a policy standpoint is that some key assumptions underlying the baseline outlook could be wrong in ways that imply that inflation will remain low for longer than currently projected. for example, labor market

as tights may not be as they appear to be. thus, they may exert less upward thanure on inflation anticipated. alternatively, long-run inflation expectations which have an important influence on actual inflation may not be consistent with the fomc's 2% goal. more broadly, the conventional framework for understanding inflation dynamics could be missed specified in some fundamental way. let's consider each of these possibilities in turn. unemployment rate consistent with long-run price stability at any time is not known with certainty. we can only estimate it. the median of the longer run unemployment submitted by fomc participants last week's around 4.5%. but the long run sustainable

unemployment rate kendrys -- can drift over time because it's demographic changes and other factors, some of which can be difficult to quantify or even identify in real-time. reasons, the other statistical precision of such estimates is limited and the actual value of sustainable rates could well be noticeably lower than currently projected. thus, although fomc participants generally view current labor utilization is probably somewhat greater than what can be theained in the longer run, statistical evidence from past experience does not rule out the possibility that some slack still remains in the labor market. if so, the economy could sustain a higher level of employment in the longer run than anticipated. a very beneficial outcome albeit one that would require

recalibrating monetary policy overtime in order to reap those thefits and compensate for accompanying reduction in inflationary pressures. whetherd question is the unemployment rate alone is a adequate gauge of economic slack for the purposes of explaining inflation. although the unemployment rate is probably the best single summary measure of later -- of labor utilization, some indicators have shown less improvement since the financial crisis. as the solid blue line in figure six illustrates, the employed work or prime age population that is persons from ages 25 to 54, remains noticeably below the 2007 level. employment rates for this group may now be permanently lower than in the past. as a result of declining employment opportunities for less skilled workers, rising

number of people receiving disability insurance, and other worrisome trends. thelarly, although part-time workers who would like a full-time job is still somewhat above where it stood before the last two recessions, it could reflect the structural change in firms reliance on part-time labor. these two measures have to be weighed against other labor market indicators that are either returned to or currently above their pre-recession levels. as shown in figure seven, those indicators include the rate, that is the short blue line, household possession of job availability, the green line, the job opening rate, the long dash redline, and the percentage

of small firms finding it hard to fill jobs, the solid black line. unemploymenthe rate probably is correct in signaling that overall labor market conditions have returned to precrisis levels. does notreturn necessarily demonstrate that the economy is now at maximum employment. because due to demographic and other structural changes, in employment rate that is lowernable today may be than the rate that we since -- that was sustainable in the past. regard, some observers have pointed to the continued subdued pace of wage growth as evidence that the economy is not yet back to full employment. as shown in figure eight, labor compensation as measured by the employment cost index, that is line, hasdash red

been growing at the same rate since 2014. and hourly compensation in the non-foreign business sector, the short and long dashed green line, a noisy measure even after smoothing, is actually growing more smoke -- more slowly. growth and average hourly earnings, the solid blueline, and the atlanta fed wage growth tracker, the long dash black line, have clearly picked up. in addition, productivity growth has been quite weakend in recent years. analysis suggest it has been holding down aggregate growth and labor compensation independent of labor utilization in recent years. in an analysis of a pattern of wage growth of the u.s. state level, also suggest that said you'd -- subdued growth probably regress -- reflects productivity or other factor common to all

because cross state differences in which growth are about what one would expect given cross state differences in unemployment rates. thelly, i would note above percentage or firms planning wage increases has moved back up to its prerecession level. many firms reported difficulties in finding qualified workers. some have responded by expanding training programs and offering possibleonuses, harbingers of a stronger wage gains to come. overall, i view the data we have in hand to suggesting a generally healthy labor market, not one in which substantial slack remains or one that is overheated. that said, the evidence does not allow for any definitive assessment, so policymakers must remain open-minded on this question and the supplications

for reaching our inflation goals. uncertaintyce of concerns inflation expectations. standard economic models, inflation expectations are an important determinant of actual inflation, because in deciding how much we adjust wages for individual jobs and prices of goods and services and at a particular time, firms take into account the rate of overall inflation they expect to prevail in the future. monetary policy presumably plays a key role in shaping these expectations. the average rate of inflation experienced in the of time,rlong periods as well as by providing guidance about the fomc's objectives for inflation in the future. even so, economists's understanding is exactly how and why inflation expectations change over time is limited.

moreover, we have to contend with the fact that we do not directly observe the inflation expectations relevant to wage and price setting. imperfectlycan only infer how things might have changed base on responses and other data. excellency -- of the fomc's outlook depends on expectations have been stable for many years at a level consistent with pce price inflation that will average of around 2% in the longer run. continueshe stability , standard models suggest that actual inflation should stabilize at about 2% over the in anwo or three years environment of roughly for employment absent in a future shocks. however, there is a risk that inflation expectations may not be as well anchored as they

appear. and perhaps are not consistent with our 2% goal. to assess this risk, the fomc considers a variety of measures of expected longer run inflation, some of which are shown in figure nine. long-range projections of pce price inflation made by private forecasters, the solid red line, have been remarkably stable for many years. as have been the longer run inflation expectations reported in surveys of financial market participants. longer-term expectations have reported in the university of michigan survey of consumers, the short stablelue line have been overall since the late 1990's. that said, results from this survey, as well as surveys of consumers carried out by the federal reserve bank of new york, do hint that expectations

may have slipped a bit over the past two or three years. if so, stabilizing inflation around 2% could prove to be more difficult than expected. theory, differences between yields unconventional treasury arerities and those on tips also informative of inflation expectations, and that they measure the compensation received by investors for exposing themselves to future changes and consumer prices. as indicated by the long dashed green line, tips inflation compensation for the five-year. bank starting five years from now has fallen roughly one percentage point over the last three years. this decline could be interpreted as a significant drop in market participants expectations for the most likely

outcome for inflation in the longer run. thever, research suggests following tips in inflation compensation instead primarily reflects a decline in inflation ink premiums and differences the liquidity of nominal and index treasury securities. this research notwithstanding, the notable decline in inflation be assigned may that longer-term inflation expectations have slipped recently. another risk is that our framework for understanding inflation dynamics could be missed specified in some fundamental way. perhaps because our a connie mack trick models -- our econometric models overlook a factor, despite solidly remarking condition -- remarkable conditions to one possibility in this vein is a continuation of the subdued growth in health care prices

that we have seen in recent years. the sector specific factor not controlled for in standard models. because health care can't -- this slow growth has restrained overall inflation materially. and may continue to do so for some time. a similar situation occurred during the 1990's, when a significant shift in health insurance enrollment away from fee for service and toward hmo ends reduced cost pressures and held down overall inflation for several years. if these sorts of a favorable supply type shops -- shocks morenue, it may require a common native stance of monetary policy than might otherwise be appropriate. havecommentators conjectured that because of

rising trade volumes in the integration of projection change across countries, u.s. inflation now depends on global resource utilization, not just on conditions here at home and those effects are rising movements in energy and import prices. issuer, studies of this do not unbalanced provide much empirical support for this possibility. moreover, foreign economic growth has affirmed this year. the global economy appears to have recovered. that globale resource utilization might have on u.s. inflation would presumably be small. nevertheless, increase competition from the integration --china and other emerging emerging-market countries into the world economy may have priceally restrained

margins and labor compensation in the united states and other advanced economies. mostct, one city concludes of the decline in the liquor share of national income in the united states since the late 1980's can be attributed to off shoring of labor intensive production. if this restraint on the labor share continues to build over the next few years, and not merely hold steady, then it could indirectly hold down the growth of domestic wages and prices in ways not captured by conventional models. changes inatively, the structure of the domestic economy may also be altering inflation dynamics in ways not captured by conventional models. the growing importance of online shopping, by increasing the competitiveness of the u.s. retail sector, may have reduced price margins and restrain the ability of firms to raise prices and response -- in response to rising demand. that said, the economy overall

appears to have become more concentrated and less dynamic in recent years. which may tend to increase firms pricing power. because these changes occur slowly, determining their complex effects on the economy will, as practical matter, requires studying data over a considerable time. finally, i would note to the possibility that inflation may toe more sharply in response robust labor market conditions than anticipated. the influence of labor utilization on inflation has become quite modest over the past 20 years, implying that the inflationary consequences of misjudging the sustainable rate of unemployment are low. but we cannot be sure that this modest sensitivity will persist in the face of strong labor market conditions, given that we

do not fully understand how it came to be so modest in the first place. although the evidence is weak that inflation response to resource utilization, the risk is one that we cannot entirely dismiss. what are the policy implications of these uncertainties? for one, my colleagues and i must he ready to adjust our assessments of economic conditions and the outlook when new data warrant it. in this spirit, fomc participants like private forecasters have reduced their estimates of the be sustainable unemployment rate up sharply over the past few years. in response to the continual flow of information about the always changing economy. to the extent these assessments change over time, so too will be out look and judgment about the