decline. labor market now let me turn to the labor market. even as the economy has grown at a solid pace, a wide range of indicators have pointed to a continued normalization in the labor market following the red - hot period in 2021 and 2022. today, most of these measures have moved from the tightest they've been in over two decades to levels more consistent with the good labor market that existed in the period before the pandemic. one measure that understandably gets a lot of attention is the unemployment rate, which has risen by nearly a percentage point from its very low reading in early 2023. still, it remains relatively low by historical standards, and some of this increase reflects 2 / 4 bis - central bankers'speeches a cool - down in the labor market from an overheated state. in addition, the increase in unemployment has occurred in the context of a strong increase in labor supply, rather than from elevated layoffs. to get the full picture of the labor market and what it means for monetary policy, it's important to monitor a wide range of data in addition to the unemployment rate. for example, i take the temperature of the labor market by looking at surveys of both households and businesses ; the rates of quits, hiring, and job vacancies ; and the job - tojob transition rates and flows between unemployment and employment states. taken together, these data indicate that the labor market is now roughly in balance and therefore unlikely to be a source of inflationary pressures going forward. monetary policy what does this mean for monetary policy? in its july statement, the fomc said it " judges that the risks to achieving its employment and inflation goals continue to move into better balance ", and that it is " attentive to the risks to both sides of its dual mandate. " 6 regarding the path of policy going forward, the committee said it " will carefully assess incoming data, the evolving outlook, and the balance of risks " and that it " does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. " the accumulated evidence has increased my confidence that inflation is moving sustainably toward 2 percent. the current restrictive stance of monetary policy has been effective in restoring balance to the economy and bringing inflation down. with the economy now in equipoise and inflation on a path to 2 percent, it is now appropriate to dial down the degree of restrictiveness

for risk management professionals. and i will offer some perspectives on how these challenges should affect the hierarchy of priorities of central banks, and of those who have responsibility for supervision and oversight of the financial system. a characteristic feature of periods of financial innovation is that growth in new instruments and changes in the structure of those markets can outpace the development of the risk management and processing and settlement infrastructure. this gap, the gap between the speed at which markets move to capture the benefits of new opportunities and the pace of development in the supporting control and execution infrastructure, is inevitable. the size and duration of the gap and the risks it presents to the financial system are a function both of will and of ability. they are determined, in part, by the scale of investments that firms make in the infrastructure - investments in people, in technology and in control processes - and they are determined in part by knowledge and experience, which are functions of the environment surrounding innovation. market discipline exercised by counterparties should create incentives to close these gaps relatively quickly, but competition among financial intermediaries can, at least for some period of time, create offsetting incentives and may make individual institutions less willing to move ahead of the pace of improvement of average practice among market participants. this can take the form of what economists call a collective action problem, leaving individual institutions and the systems as a whole with more risk than would be desirable. and when innovation, such as we are now seeing in credit derivatives, takes place in a period of generally favorable economic and financial conditions, we are necessarily left with more uncertainty about how exposures will evolve and markets will function in less favorable circumstances. the past several years of exceptionally rapid growth in credit derivatives and the larger role played by nonbank financial institutions, including hedge funds, has occurred in a context of very low realized credit losses, low expectations of future default risk, a high degree of confidence in the financial strength of the major banks and investment banks, relatively strong and significantly more stable economic growth, less concern about the level and volatility in future inflation, and low expected volatility in many asset prices. even if a substantial part of these changes prove durable, we know less about how these markets will function in conditions of stress, and the most sophisticated tools available for measuring potential losses have less to offer than they will with the benefit of experience with adversity. several aspects of the present context are worth highlighting. • the scale of the over - the - counter derivatives markets is very large.