it has been harder than we might have wished to stimulate consumption. " the reserve bank and the treasury now have a work programme focused on whether there are ways to reduce the likelihood of finding our economy out of sync again ; or on handling it differently if we do. " what is clear is that in a globalised world most of the government's economic policies, including fiscal, industry and immigration policies, are all constrained by other countries'policies and by international pressures on them. with financial markets so interconnected, any small country's domestic monetary policy also now needs to be seen in an international setting. " nevertheless, there is no question that we can run an independent monetary policy. we have control of our ship. if global winds are not behind us or our economy is out of sync with influential economies, then our progress becomes more difficult, and things can get uncomfortable. we may have to modify our chosen course. " but with major economies now raising their interest rates, global conditions are becoming aligned to containing inflation. in these conditions, new zealand monetary policy is increasingly effective. indeed in some respects we are in a more comfortable position than some other countries, having already raised interest rates. " in the meantime, we are starting to see some other countries, especially small open commodity economies, realising this too as they start to face the same pressures. they have been following the new zealand experience with interest. "

very briefly recall the most important factors influencing the interest rate decisions taken by the eurosystem in the course of 1999. in the first few months of this year, there were increasing indications that the negative effects of the crises in asia and russia on growth and employment in the euro area might be more serious than had initially been expected. with the apparent cyclical slowdown in economic growth in the euro area, the balance of risks to future price stability moved significantly to the downside. this assessment was also reflected in the downward revisions to the inflation forecasts of international organisations. at that point in time, growth was slightly above the reference value, but there were several indications - also against the background of historically low interest rates - that m3 was temporarily being distorted upwards in early 1999 as a result of the changeover to stage three of emu. thus, in early 1999, it did not appear that m3 growth revealed upside risks to price stability, in particular as non - monetary indicators pointed to increased downside risks for future price developments. all in all, the forwardlooking and medium - term orientation of the single monetary policy made it necessary for the governing council to take action. with a view to maintaining price stability in the euro area over the medium term, the governing council of the ecb thus decided at the beginning of april 1999 to reduce the interest rates on the main refinancing operations by 50 basis points to 2. 5 %. at around the beginning of the summer, it appeared that prospects for economic growth in the euro area had improved. during the summer months both pillars of the eurosystem ’ s strategy concurred in indicating that the balance of risks to future price stability had gradually been moving towards the upside. monetary growth had increased considerably in the course of 1999. the three - month average stood at 5. 9 % for the period from july to september 1999. even when the data was adjusted for the somewhat specific movements of m3 in january and february, we could see that the annualised figure for m3 growth from march to september was 6. 1 %. all this took place in a significantly different economic environment than in april. for this reason, the governing council had to react. on 4 november the governing council decided to raise the interest rates on the main refinancing operations by 50 basis points to 3. 0 %. the increase in interest rates at that point in time was aimed at helping to counter the upward pressure on future prices and at contributing to keeping