occurred in the australian government bond market and other advanced economy bond markets : a desperate scramble for cash : portfolio managers and other investors sought to increase the amount of cash in their portfolios, in part to meet redemption requests and margin calls and in part reflecting asset reallocation by their investors. the portfolio managers achieved this by selling the most liquid part of their portfolios, which was often fixed income and particularly government bonds. rebalancing : as equity prices declined but the value of bonds rose sharply ( bond yields declined ), asset managers rebalanced their portfolios by selling bonds and buying equities. leveraged trade unwinds : leveraged traders in the government bond market had positions exploiting small pricing ‘ discrepancies ’, such as the difference between bond futures and the underlying bonds they reference as well as between these reference or ‘ on - the - run ’ bonds and the ‘ off - the - run ’ bonds. [ 8 ] because these discrepancies are generally very small, leverage is required to make the trades worthwhile. as interest rate volatility increased, these traders were required to unwind these positions, generating further selling pressure and even higher interest rate volatility. foreign exchange intervention : a number of emerging economy central banks intervened in their foreign exchange markets to support their exchange rates as they depreciated. this involved selling us treasuries and other bonds in their foreign reserves portfolios, including australian government bonds. the effect of these sales are evident in the tic data in the us and in australia's balance of payments statistics for the march quarter, which showed a marked decline in the foreign holdings of australian government bonds ( graph 4 ). rba4 - local. rba. gov. au / speeches / 2020 / sp - dg - 2020 - 06 - 30. html 6 / 18 30 / 06 / 2020 the reserve bank's policy actions and balance sheet | speeches | rba graph 4 dealer balance sheet constraints : investors sell their bonds to the dealers who act as the main intermediaries in the bond market. in the face of the large selling pressure, dealers were constrained in their ability to absorb these flows by the changed regulatory environment over the past decade as well as their own internally imposed risk limits. whilst this should not have been that surprising, it nevertheless increased the degree of price volatility and dysfunction in the market. the dysfunction was evident in the heightened interest rate volatility in the

philip lowe : inflation and monetary policy address by mr philip lowe, governor of the reserve bank of australia, to citi's 8th annual australian and new zealand investment conference, sydney, 18 october 2016. * * * i would like to thank james bishop, andrea brischetto and merylin coombs for assistance in the preparation of this talk. i would like to thank citi for the invitation to speak at this year ’ s investment conference. i am very pleased to be here. this is my first speech as governor of the reserve bank of australia, so i would like to organise my remarks around the topic of inflation and monetary policy. nominal interest rates around the world have been at record low levels for some years and there has been extraordinary balance sheet expansion by a number of the world ’ s major central banks. yet, at the same time, inflation rates in most advanced economies remain below target. there are also concerns in some economies that inflation expectations have declined too far and are perhaps stuck at levels that are too low. this is quite a different world to the one that has existed over the past half - century. indeed, i am the first governor of the rba to have taken office where the concern of the day is more that inflation might turn out to be a bit too low rather than a bit too high. this morning i would like to focus on three interrelated issues. the first is why we have seen these low inflation outcomes across much of the world. the second is how we think about the low inflation outcomes in australia in the context of our flexible medium - term inflation target. and the third is decisions on monetary policy by the reserve bank board over recent times. low global inflation : why? it is always useful to start with the facts. this first graph ( graph 1 ) shows the average rate of inflation for a range of countries over the past two years ( the blue bars ) as well as the average rate over the past 20 years ( the black dots ). in almost all economies, inflation has recently been noticeably below its long - term average. 1 / 13 bis central bankers'speeches this second graph ( graph 2 ) shows a time series of headline and core inflation rates averaged across the major advanced economies. again, the picture is clear. while headline inflation has picked up a little recently, the outcomes over recent years have been the lowest for many decades, with the exception of a short period during the global financial crisis. core inflation rates have also been