jobs numbers for some time to fully get the country back to work. the labor market indicator that gets the most media attention is the unemployment rate. but that statistic may not be the best measure of the overall health of the labor market because people who temporarily drop out of the labor force don ’ t get counted as unemployed. it ’ s vital that we look at a wide range of indicators to gauge the health of the labor market. one measure that i find useful is the employment - to - population ratio, or “ epop ” as it ’ s affectionately known. epop is the share of the population that have jobs according to a monthly survey of households. before the pandemic, when the labor market was quite strong, epop was about 61 percent. by april of last year, it had fallen nearly 10 percentage points, which translates to 25 million fewer people working — an astounding drop. fortunately, epop has risen considerably since then, but it ’ s still more than three percentage points below pre - pandemic levels. that difference translates to about eight and a half million fewer people working, close to the statistic i cited on the number of lost jobs that is based on a survey of employers. these are aggregate numbers and only tell part of the story. it ’ s also important to understand that the downturn has disproportionately affected certain sectors of the economy and segments of society. service - sector jobs, especially those in hospitality and leisure, fell dramatically with last spring ’ s shutdown of the economy. and a large share of the job losses fell on black and hispanic households. now i ’ ll turn to inflation, the other half of our dual mandate. with recent rises in energy prices and the reversals of last spring ’ s large price declines, the inflation rate has increased from the very low levels seen during the earlier stages of the pandemic. as the economy further reopens, these dynamics will continue to play out, and i expect inflation to run somewhat above our 2 percent longer - run goal for the remainder of this year. it ’ s important not to overreact to this volatility in prices resulting from the unique circumstances of the pandemic and instead stay focused on the underlying trends in inflation. my expectation is that once the price reversals and short - run imbalances from the economy reopening have played out, inflation will come back down to about 2 percent next year. although the u

question : what are the potential challenges in implementing the countercyclical capital buffer? 51. as we noted earlier, a critical component of the basel iii package is a countercyclical capital buffer which mandates banks to build up a higher level of capital in good times that could be run down in times of economic contraction, consistent with safety and soundness considerations. this is conceptually neat, but is challenging in operational terms, as indeed evidenced by spain ’ s recent experience. the foremost challenge is identifying the inflexion point in an economic cycle which should trigger the release of the buffer. it is quite evident that both tightening too early or too late can be costly in macroeconomic terms. the identification of the inflexion point therefore needs to be based on objective and observable criteria. it also needs long series data on economic cycles. so, what we need is both a better database and more refined statistical skills in analyzing economic cycles. 52. the countercyclical capital buffer as prescribed in basel iii was initially based on the credit / gdp metric. is this a good economic indicator from the indian perspective? a study undertaken by the reserve bank shows that the credit to gdp ratio has not historically been a good indicator of build up of systemic risk in our banking system. 53. furthermore, some economic sectors such as real estate, housing, micro finance and consumer credit are relatively new in india, and banks have only recently begun financing them in a big way. the risk build up in such sectors cannot accurately be captured by the aggregate credit to gdp ratio. the reserve bank has so far calibrated countercyclical policies at the sectoral level, and i believe we need to continue to use that approach. the basel committee also has now recognized that no single variable can fully capture the dynamics of the economic cycle. appropriate calibration of the buffer requires country specific judgement backed by a broad range of other simple indicators used in financial stability assessments. 9th question : what are d - sibs? will any indian bank be classified as a d - sib? 54. the moral hazard relating to too - big - to - fail institutions which encourages risky behaviour by larger banks has been a huge issue on the post - crisis reform agenda. basel iii seeks to mitigate this externality by identifying global systemically important banks ( g - sibs ) and mandating them to maintain a higher level of capital dependent on their level of systemic bis central bankers ’ speeches importance. the