priced as a margin above the es balance rate. this is because the es balance rate is the opportunity cost for banks considering whether to lend spare cash overnight or leave it sitting with the reserve bank. but, given that the gap between the es balance rate and the cash rate target is just 10 basis points, this also means that the cash rate is only trading a little below the cash rate target. moreover, banks borrowing cash have little need to pay more than the cash rate target – they know that there should be many banks willing to lend cash at that price and, if needed, they can obtain similar liquidity themselves via the reserve bank's open market operations at a similar ( term - matched ) rate. [ 7 ] 9 / 11 23 / 05 / 2022, 13 : 03 from qe to qt – the next phase in the reserve bank's bond purchase program | speeches | rba when considering the framework, the board saw value in continuing to set and communicate both the remuneration rate on es balances and the cash rate target in policy announcements. it also agreed to maintain the current margin of 10 basis points between the es rate and the cash rate target ( subject to periodic review, as the appropriate margin could change over time as market conditions evolve ). in the current environment, that modest difference helps to ensure effective control of the cash rate. conclusion in may, the board began to remove some of the extraordinary monetary policy stimulus put in place to help support the economy through the pandemic. the focus of most observers at that time was on the 25 basis point increase in the cash rate target and the rate paid on es balances. that's as it should be. but at the same time, the bank also decided to proceed with quantitative tightening – by allowing its bond holdings to mature in a steady and predictable way over time. the bond purchase program was adopted in late 2020 to provide additional support to the australian economy at the same time that the cash rate was reduced to its effective lower bound. the bond purchases helped to reduce yields further out the curve and contributed to a lower value of the australian dollar than otherwise. as the bank now takes steps to remove the considerable monetary stimulus, increases in the cash rate are the tried and tested measure that will do most of the work, including because they can be easily calibrated to evolving economic conditions. the end of the tff and the gradual process of qt will also play a role in this task, but

council ’ s view, subject to upside risks. these stem from the possibility of renewed oil price increases and additional increases in administered prices and indirect taxes beyond those announced and decided thus far. more fundamentally, stronger than currently expected wage developments would pose significant upward risks to price stability, particularly in view of the favourable momentum of real gdp growth. it is therefore crucial that the social partners continue to meet their responsibilities and that wage agreements take into account present relative price competitiveness positions, the still high level of unemployment in many countries as well as productivity developments. the governing council will monitor the upcoming wage negotiations in the euro area countries very carefully. turning to the monetary analysis, this confirms the prevailing upside risks to price stability at medium to longer horizons. annual m3 growth was unchanged at 9. 8 % in january, remaining at the highest rate observed since the introduction of the euro. at 10. 6 %, the annual growth rate of loans to the private sector also remained strong in january. this reflects the continuation of the upward trend in the growth of borrowing by non - financial corporations seen since mid - 2004. meanwhile, the growth of household borrowing has shown some further signs of moderation in recent months, albeit remaining at still high rates. taking the appropriate medium to longer - term perspective, the latest developments confirm the continuation of a persistent upward trend in the underlying rate of monetary expansion. furthermore, following several years of robust monetary growth, the liquidity situation in the euro area is ample by all plausible measures. the robust expansion of money and credit in an environment of ample liquidity points to upside risks to price stability over the medium to longer term. monetary developments therefore continue to require very careful monitoring, particularly against the background of a solid expansion in economic activity and continued strong property market developments in many parts of the euro area. to sum up, in assessing price trends it is important to look through any short term volatility in inflation rates. at the policy - relevant horizon of the medium term, risks to price stability remain on the upside, relating in particular to stronger than currently expected wage developments in a context of robust ongoing growth in employment and economic activity. given the vigorous monetary and credit growth in an environment of already ample liquidity, a cross - check of the outcome of the economic analysis with that of the monetary analysis supports the assessment that upside risks to price stability prevail over the medium to longer term. monetary policy transmission in the euro area and the us in my remarks today i would also like to