##holders can use their bargaining power to obstruct a resolution of the crisis in hopes of getting a better deal. after the mexican crisis had been resolved with the help of significant new official lending to mexico, the international community focused on how to improve the bargaining position of the debtor government with its bondholders if such a crisis should arise in the future. the “ rey report ” on sovereign liquidity crises ( named for its author, jean - jacques rey of the central bank of belgium ) was a major effort by the g - 10 countries to learn the lessons of mexico. it recommended two new steps : • first, the imf should expand its willingness to lend into arrears to cover the situation in which a sovereign was making a good faith effort to work out a debt restructuring with its bondholders. • second, it recommended that bonds issued in international markets contain clauses that would facilitate debt restructuring if it became necessary. clauses could be added to provide for debt - holder representation in negotiations with the sovereign or qualified majority voting on changes in terms. such clauses would make it harder for minority creditors to block restructuring or exact a higher price than necessary to satisfy the majority. neither of these recommendations received much official attention until the asian crisis hit. although the recommendations were not actually germane to the situation in asia, the imf reviewed the recommendations at its interim committee meeting in april 1998 and action in the near future seems more likely than a year ago. perhaps the official community will always be one crisis late. unlike the sovereign debt crises in latin america, the situation in asia involved private debts ( of banks in korea, corporations in indonesia, and some of each in thailand ) to private creditors, mostly banks. hence, it was inherently harder, as currency values plummeted and reserves all but disappeared, to design ways either to restore stability or to organize work - outs. an additional complication was the fact that, although the debts were private, some of them involved varying types of implied government guarantees. in korea, the finance minister ill - advisedly volunteered that the korean government would honor foreign debts of korean banks. when the korean banks experienced difficulty rolling over their international bank loans, the bank of korea provided the reserves they needed to repay the loans, in effect delivering on the guarantee, but rapidly depleting the central bank ’ s reserves in the process. guarantees of this sort clearly create moral hazard. pre - crisis, they result in more bank lending than would otherwise have taken place, and

toward pre - pandemic levels. indeed, the labor force participation rate of women in their prime working years reached an all - time high in june. demand for labor has moderated as well. job openings remain high but are trending lower. payroll job growth has slowed significantly. total hours worked has been flat over the past six months, and the average workweek has declined to the lower end of its pre - pandemic range, reflecting a gradual normalization in labor market conditions ( figure 5 ). this rebalancing has eased wage pressures. wage growth across a range of measures continues to slow, albeit gradually ( figure 6 ). while nominal wage growth - 7must ultimately slow to a rate that is consistent with 2 percent inflation, what matters for households is real wage growth. even as nominal wage growth has slowed, real wage growth has been increasing as inflation has fallen. we expect this labor market rebalancing to continue. evidence that the tightness in the labor market is no longer easing could also call for a monetary policy response. uncertainty and risk management along the path forward two percent is and will remain our inflation target. we are committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to that level over time. it is challenging, of course, to know in real time when such a stance has been achieved. there are some challenges that are common to all tightening cycles. for example, real interest rates are now positive and well above mainstream estimates of the neutral policy rate. we see the current stance of policy as restrictive, putting downward pressure on economic activity, hiring, and inflation. but we cannot identify with certainty the neutral rate of interest, and thus there is always uncertainty about the precise level of monetary policy restraint. that assessment is further complicated by uncertainty about the duration of the lags with which monetary tightening affects economic activity and especially inflation. since the symposium a year ago, the committee has raised the policy rate by 300 basis points, including 100 basis points over the past seven months. and we have substantially reduced the size of our securities holdings. the wide range of estimates of these lags suggests that there may be significant further drag in the pipeline. beyond these traditional sources of policy uncertainty, the supply and demand dislocations unique to this cycle raise further complications through their effects on - 8inflation and labor market dynamics. for example, so far, job openings have declined substantially without increasing unemployment — a highly