in other words, just pulling back on the rate of ascent a little bit. at this angle of ascent, with policy already in restrictive territory, the federal funds rate can still be increased quite rapidly with several 50 - basis - point increases, a pretty aggressive path for policy. so, although i believe we are seeing some progress in the economy to dampen demand that will help moderate inflation, we have not yet made enough progress. as i have said recently, i expect that getting inflation to fall meaningfully and persistently toward our 2 percent target will require increases in the federal funds rate into next year. we still have a ways to go. until then, i support continued rate increases and ongoing reductions in the fed's balance sheet to restrain aggregate demand. when we reach our terminal rate, how long we stay at that level will largely be driven by our progress in bringing down inflation. 1 see christopher j. waller ( 2022 ), " the economic outlook with a look at the housing market, " speech delivered at the mark c. berger workshop series, university of kentucky, lexington, kentucky, october 6. 2 see board of governors of the federal reserve system ( 2022 ), " federal reserve issues fomc statement ( pdf ), " press release, november 2. 6 / 6 bis - central bankers'speeches

time, the financing of these investments, to a large extent, was seen as prudent because the telecom borrowers had very high market valuation that could facilitate, if needed, a stock issuance take - out of bank and other debt. in the event, of course, prices of telecom stocks collapsed, and many firms went bankrupt. in decades past, this situation would have been a recipe for severe financial distress. however, a significant amount of exposure to telecom debt had been laid off through credit risk mitigation instruments, such as credit default swaps, collateralized debt obligations, and credit - linked notes. this appears to have reduced telecom loan concentrations and the stress on banks and other financial institutions. in addition, such instruments, more generally, appear to have effectively spread losses from recent defaults by enron, global crossing, railtrack, and swissair in recent months. in particular, the still relatively small, but rapidly growing, credit derivatives market has to date functioned well, with payouts proceeding smoothly for the most part. obviously, this market is still too new to have been tested in a widespread credit down - cycle. but so far, so good. the markets for more traditional derivatives, such as interest rate swaps and foreign exchange forwards and swaps, grew rapidly over the past several years. according to the latest tabulation of the bank for international settlements, the aggregate worldwide notional value of the over - the - counter derivatives market grew to an awesome $ 100 trillion by the end of june 2001, though it has apparently slowed somewhat since then. gross credit exposure was at that time estimated at $ 1 trillion, after taking account of legally enforceable netting agreements. potential credit losses on these instruments were further mitigated through the growing use of collateral agreements. such agreements provided substantial protection to enron's counterparties, for example. beyond the major advances in asset securitization and the expanded development of derivative instruments, we have witnessed a large number of unheralded advances in finance facilitated by our enhanced computer and telecommunications capabilities. in recent years, for example, the switch to electronic trading for interbank spot foreign exchange transactions has markedly reduced the trading volumes required to maintain an effective market. various types of electronic communication and trading systems have been developed for otc derivatives. to be sure, otc derivatives dealers have been slow to take advantage of these systems, but sooner or later market forces are likely to compel them to do so. * *