This could have had hysteresis-like effects by shifting the Phillips curve inwards and permanently lowering the inflation rate, towards which the economy gravitates once all shocks have dissipated. Fortunately, survey-based measures of medium-term inflation expectations have consistently remained close to our definition of price stability. But the concrete anatomy of labour market dynamics and the possible effects of hysteresis arguably become more important in informing monetary policy decisions at later stages of the easing cycle or at turning points. With the recovery in the euro area now fully underway, policymakers must judge at what point they expect inflationary pressures to emerge in a sustainable manner that would warrant a gradual withdrawal of policy accommodation. Conditions in the labour market are, of course, an important part of this discussion. Wage developments are a key driver for service price inflation and, thus, for headline inflation. The amount of slack we expect to see in the economy, and in the labour market in particular, therefore has an important bearing on our stance. For example, were we to ignore the facts that I just presented, namely that labour market slack 6/9  BIS central bankers' speeches  may be larger than is suggested by headline unemployment measures, we could run the risk of tightening policy prematurely. Choking off growth too quickly would lead to us failing on our medium-term inflation mandate and would needlessly keep people out of work.
The Federal Reserve is an active participant in international efforts regarding payment systems via the Committee on Payments and Markets Infrastructures (CPMI) at the BIS. The CMPI collects best practices and issues recommendations for managing payments, clearing, and settlement risk across financial market utilities. At present, a high-priority area of study for the CMPI is coordinating the development of 24/365 RTGS systems – like FedNow – globally. Innovation in cross-border settlements will reduce liquidity outlays and settlement risks, leading in turn to cheaper cross-border payments. The New York Innovation Center and Project Cedar In the remainder of my remarks, I'd like to focus on an example of ongoing innovation research that is currently underway at the Federal Reserve Bank of New York. To further enhance our ability to contribute to financial innovation globally, the New York Innovation Center, or NYIC, was established in 2021. The NYIC bridges the worlds of finance, technology, and innovation. Through technical research, experimentation, and prototyping, our team generates insights into high-value central-bank-related opportunities, enabling stakeholders and the central bank community to enhance the functioning of the global financial system. 3/5  BIS - Central bankers' speeches  Project Cedar is the inaugural project of the NYIC and represents the first stage of the NYIC's research efforts into CBDCs, the NYIC's biggest focus area in 2022. A goal of the NYIC is to progress CBDC research with an objective of defining a technical design for a CBDC addressing the wholesale market in the Federal Reserve context.