a train timetable but more like how a captain sets a course and adapts to the wind and the waves. so our sequence of steps for policy normalisation is very predictable : first, we halved our net asset purchases to 15 billion this month and will very probably end them in december. second, we set down a guide post with our long - dated forward guidance : we will maintain interest rates at current levels until at least through the summer of 2019. and third, we will retain our stock of assets for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. moreover, this sequence doesn ’ t depend on the fiscal uncertainties that can appear in member states. the governing council is clear about the fact that there is no fiscal dominance in the euro area and no influence of any national fiscal policy on our common monetary policy. flexibility – our sequence is clear but the details of implementation are flexible and state1 / 3 bis central bankers'speeches dependent. we have included several options to deal with incoming data. let me illustrate this on two points : one frequent focus of speculation is the precise timing of the first increase in interest rates and the path of policy rates thereafter. obviously, we have to consider here the trade - off between more clarity today and flexibility tomorrow. it is true that forward curves beyond the second half of 2019 are somewhat volatile. but for the time being, this volatility is relatively modest, and certainly so for interest rates that matter for the economic decisions of households and corporates. therefore the trade - off currently favours keeping our options open. i wouldn ’ t see any value in trading off our flexibility tomorrow against more clarity today but as we approach the summer of 2019, the balance will shift in favour of detailing our forward guidance. we also have flexibility over reinvestment. we will soon discuss, as mario draghi said, the technicalities of our 2019 reinvestments to ensure market neutrality. but we should keep our options open about the timing of our reinvestment in the following years. in the face of uncertainty, one often hears reference to the celebrated brainard 1 ‘ conservatism principle ’ ( as reinterpreted by alan blinder 2. this is not, as the impression is sometimes given, a general warning to move cautiously when the world is uncertain. the brainard ‘ conservatism principle ’ says only that you should move cautiously if you are uncertain about the effect of your policy instrument on

2. 7 percent. this gap between the actual growth rate and the potential growth rate increases pricing pressures in the economy. some factors are constraining the recovery in potential output growth. while new zealand ’ s labour force participation is close to its pre - recession peak and the unemployment rate is falling, data suggests that skilled labour is becoming more difficult to find. the share of investment in gdp fell sharply in the recession and is now only back to its pre - recession level. labour productivity only surpassed the pre - recession level in 2011 and oecd data suggests that multifactor productivity fell during the recession and has been slow to recover. price pressures are particularly apparent in the construction sector as resources are reallocated to canterbury and auckland from other regions and activities, and spare capacity in the economy is being absorbed at a rapid rate. such cost pressures could spill over into broader consumer price inflation, particularly if the construction sector reaches capacity constraints ( employment in the sector is currently 9 percent below its 2006 peak ). household debt is rising again and households are forecast to spend more than they earn in 2014. stronger inflation pressures and the increase in interest rates that would accompany them could put pressure on new zealand ’ s real effective exchange rate and reduce the competitiveness of our export and import - competing industries. 3 potential output is the rate of growth that the economy can sustain at full employment without generating inflationary pressures. the real effective exchange rate provides a more accurate picture of competitiveness than the nominal effective exchange rate as it corrects for differences in relative inflation rates ( or relative unit labour cost movements ) between new zealand and its major trading partners. bis central bankers ’ speeches increases in the price of construction services in canterbury are needed to attract resources to the re - build, but a key issue is whether they are spilling over into other sectors and regions. there are signs that this is starting to happen. annual construction cost inflation in auckland and the rest of the country has risen steadily over the past 12 months and is currently running at 5 percent ( figure 6 ). inflation pressures may also intensify if there is a rapid fall in the exchange rate. exchange rate corrections can never be ruled out, especially when the exchange rate remains close to historic highs on a twi basis and in the top decile of historic experience against the major currencies, including the australian dollar. the new zealand exchange rate has experienced rapid and prolonged falls on several occasions over the past 30 years ( figure 7 ). the monetary policy