the fed listens program as well as the bank of england ’ s citizens ’ panels and community forums. around the world, central banks are using museums, social media, podcasts, even reggae songs, to tell their stories to their citizens. the bank of canada, like others, has taken steps to sharpen its public communications. we publish layers of content aimed at different audiences. we produce short animations to illustrate the main points of our flagship publications — the monetary policy report and the financial system review — and we promote these across social media channels. we use readability tools to ensure that public speeches are not unnecessarily complex. after all, even an audience as expert as this one is more likely to lose attention if i ’ m reading what sounds like a phd dissertation. ( hopefully that ’ s not what i sound like. ) further, we are working hard to make our communications more relatable to people ’ s everyday lives. let ’ s use this pandemic as an example. covid 19 has caused a huge disinflationary shock. but we need to recognize that many people don ’ t feel like inflation is falling when food inflation has been averaging almost 3 percent. people should know that we are taking that into account when we make policy. deputy governor larry schembri devoted an entire speech to this topic earlier this week. a key to enhancing our relatability is listening — engaging the public in conversations. the pandemic has precluded many traditional events where these conversations can happen. so, we are being nimble with technology to engage stakeholders, including the public. we just launched a “ let ’ s talk inflation ” online campaign as part of our effort to reach out to all canadians before the bank renews its agreement with the canadian government on the monetary policy framework in 2021. we know that there is a clear correlation between increased understanding and higher levels of trust. this correlation demands that we devote more effort to economic and financial literacy. to that end, the bank of canada replaced one of its expert publications with a more accessible digital magazine, the economy, plain and simple, to explain relevant and timely economic 2 / 3 bis central bankers'speeches issues to non - expert audiences. we have added a series of simple articles, videos and animations to explain the ways we ’ ve responded to the pandemic, covering everything from quantitative easing to payment systems. an opportunity to build trust in times of crisis, people look to public

9. monetary policy perspective from a monetary policy perspective, the bank has two concerns : first that construction cost pressures could feed into generalised price inflation ; and second that house price increases could cause households to increase their spending, reducing savings and putting additional pressure on overall domestic demand. the ocr increases that commenced in march are aimed at countering emerging inflation pressures in general, but their success, or otherwise, in moderating housing related pressures will be key. based on current market interest rate expectations, adjusted for an average mortgage interest margin, floating mortgage rates could be 7 to 8 percent in two years ’ time, up from current levels of around 5 to 6 percent. while this would be a significant move, figure 9. 1 indicates that it would take mortgage rates back to their average of the past 20 years. that is, the outlook is towards a normalisation of mortgage rates which are currently near to 50 year lows. we should not expect to see historically low interest rates at a time when the new zealand economy is growing strongly. having said that, the timing and extent of interest rate increases required over the coming period will depend on a number of uncertain variables. a big uncertainty is the future path of the exchange rate, which has a major bearing on traded goods prices and overall economic activity. the more downward pressure that the exchange rate exerts on prices and activity, the less pressure will need to be exerted by interest rates. the other big area of uncertainty is around housing. will inward migration continue to underpin housing demand? will the dampening impact of the lvr restrictions be long lasting? will the supply response soon start to have a moderating effect on house prices? will home owners increase their spending out of capital gains? and how will rising mortgage rates affect spending by borrowers? bis central bankers ’ speeches with regard to this last question, we expect that interest sensitivity will be greater now than during the last tightening phase in 2003 – 2007. first, most new zealand mortgages are currently on either floating or relatively short - term fixed rates whereas in 2003 – 2007 the bulk of mortgage borrowers were on 2 - to - 4 year fixed rates. this means that ocr increases will be felt more immediately by existing as well as new mortgage borrowers. second, a higher starting level of mortgage debt relative to incomes means that any given interest rate increase will have a larger impact on monthly debt service payments, relative to incomes, than in the previous cycle. this latter point is shown