To understand where the economy might be heading, we should take a look at where it has been recently. A year ago, our economy, indeed all the world's major economies were reeling from the effects of a devastating financial crisis. Policymakers here and abroad had undertaken an extraordinary series of actions aimed at stabilizing the financial system and cushioning the economic effects of the crisis. Critically, these policy interventions succeeded in averting a global financial meltdown that could have plunged the world into a second Great Depression. But although a global economic cataclysm was averted, the crisis nevertheless had widespread and severe economic consequences including deep recessions in most of the world's major economies. In the United States, for example, the unemployment rate, which was as low as 4.4 percent in March 2007, currently stands at 10 percent. Recently we've seen some pickup in economic activity reflecting, in part, the waning of some forces that had been restraining the economy during preceding several quarters.

Economic forecasts are subject to great uncertainty. But my best guess at this point is that we will continue to see modest growth next year, sufficient to bring down the unemployment rate, but at a pace slower than we would like. A number of factors support the view that the recovery will continue next year. Importantly, financial conditions continue to improve. Corporations are having relatively little difficulty raising funds in the bond and stock markets. Stock prices and other asset values have recovered significantly from their lows, and a variety of indicators suggest that fears of systemic collapse have receded substantially. Monetary and fiscal policies are supportive. And I've already mentioned what appear to be improving conditions in housing, consumer expenditure, business investment, and global economic activity. On the other hand, the economy confronts some formidable headwinds that seem likely to keep the pace of expansion moderate. Despite the general improvement of the financial conditions, credit remains tight for many borrowers, particularly bank-dependent borrowers such as households and small businesses. And the job market, though no longer contracting at the pace we saw in 2008 and earlier this year, remains weak. Household spending is unlikely to grow rapidly when people remain worried about job security and have limited access to credit.
We've played an important part in helping to restart the markets for asset-backed securities that finance auto loans, credit card loans, small business loans, student loans, loans to finance commercial real estate and other types of credit. By working to revive these markets which allow banks to tap the broader securities markets to finance their lending, we have helped banks make room on their balance sheets for new credit to households and businesses. In addition, we have supported the overall functioning of private credit markets and helped to lower interest rates on bonds, mortgages, and other loans by purchasing unprecedented volumes of mortgage-related securities and Treasury debt. In all of these efforts, our objective has not been to support specific financial institutions or markets for their own sake. Rather, recognizing that a healthy economy requires well-functioning financial markets, we've moved always with the single aim of promoting economic recovery and economic opportunity. In that respect, our means and goals have been fully consistent with the traditional functions of a central bank, and with the mandate given to the Federal Reserve by the Congress to promote price stability and maximum employment.