. this means that the solution needs to originate from within the firms, from their leaders. what do i mean by the culture within a firm? culture relates to the implicit norms that guide behavior in the absence of regulations or compliance rules – and sometimes despite those explicit restraints. culture exists within every firm whether it is recognized or ignored, whether it is nurtured or neglected, and whether it is embraced or disavowed. culture reflects the prevailing attitudes and behaviors within a firm. it is how people react not only to black and white, but to all of the shades of grey. like a gentle breeze, culture may be hard to see, but you can feel it. culture relates to what “ should ” i do, and not to what “ can ” i do. stephanie chaly, james hennessy, steven manzari, hamid mehran, thomas noone and joseph tracy contributed to this speech. saabira chaudhuri, “ banks ’ legal tab still running higher. ” wall street journal, july 23, 2014. o ’ toole and bennis, “ what ’ s needed next : a culture of candor. ” harvard business review, june 2009. bis central bankers ’ speeches a number of factors have contributed to the cultural failures that we have seen. an important question is whether the sheer size, complexity and global scope of large financial firms today have left them “ too big to manage. ” large problems can originate in small corners of these firms, as illustrated by the financial products group experience at aig, and the “ london whale ” episode at jpmorgan. differences in attitudes and business practices across countries can also be difficult to reconcile within a firm ’ s overall compliance function. recent fines against bnp paribas for violating u. s. sanctions programs and providing dollar funding to a country engaged in genocide and against credit suisse for facilitating tax evasion by u. s. citizens, point to these challenges. another important element affecting culture has been the shift in the prevailing business model away from traditional commercial and investment banking activities to trading ; that is, from client - oriented to transaction - oriented activities. clients became counterparties – the other side of a trade – rather than partners in a long - term business relationship. in general, interactions became more depersonalized, making it easier to rationalize away bad behavior, and more difficult to identify who would be harmed by any unethical actions. high - powered pay incentives linked to short

story. in typical recessions, the challenge is that there are not enough jobs available for the number of people seeking work. in today ’ s job market, demand for labor is very high — we hear that from employers who are finding it hard to fill all their openings — and a lot of people are getting hired. at the same time, people are leaving their jobs in large numbers, either to look for new work or exit the labor force altogether. this cycle of hires and quits reflects the extraordinary nature of the pandemic, as workers and employers adapt to rapidly changing circumstances. these vacancies won ’ t be filled instantly — it takes time for employers to find the right workers. but as demand for workers and progress on hiring remains strong, i am confident that we will continue to see meaningful job gains and continued progress toward maximum employment. the last aspect of the outlook that i ’ ll speak about is inflation. recent data show core inflation, which excludes volatile food and energy prices, running at about 3 - 1 / 2 percent, which is well above the federal reserve ’ s longer - term 2 percent goal. taking a closer look at the data, it ’ s clear that this spike in inflation largely reflects the transitory effects of the rapid reopening of the economy, which is pushing supply and demand in extreme ways. as the economy gets through these unusual dynamics, i expect inflation to come back down to around 2 percent next year. given the complexity of this topic, i ’ ll go into this in more detail. i find it helpful to view recent developments in terms of three categories. the first is related to prices for goods and services that underwent huge declines during the pandemic but are now rebounding as the economy reopens. for example, in the first year of the pandemic, prices for airfare and lodging fell sharply as people cut back on travel. since then, we ’ ve seen these rebound toward their pre - pandemic trends, pushing the inflation rate up. one simple way to get a better read of inflation that is not overly influenced by these big swings in prices is to take the average inflation rate from the start of the pandemic. that calculation shows that core inflation has averaged 2 - 3 / 4 percent since february of last year. but even that number is heavily influenced by the effects of the pandemic on the second category : used vehicles. even though used cars and trucks are a small category, their soaring