of credit and, until recently, an excessive rate of growth of house prices. i can understand people ’ s concerns and their desire for better and better economic performance, but i hope they are not pinning too much faith in monetary policy because there is a limit to what it can be expected to perform. in essence, monetary policy has one instrument - it can set the path of short - term interest rates. over the past dozen years or so, it has set a path which has achieved the outcomes for inflation, growth and employment which i have just outlined. what would have happened if, instead, we had aimed our monetary policy at one of the other objectives put forward, say a substantially lower growth of credit. i am not sure whether we would have been able to achieve this, but i do know that the attempt to do so would have required setting a path of interest rates which was significantly higher than the one we did. this, in turn, would have meant that the outcomes for inflation and economic growth would have been lower than we actually achieved. i do not think this would have been a good economic result, and it certainly would have violated the letter and the spirit of our agreement on accountability. as i said earlier, a central bank cannot be accountable for everything, and our monetary regime recognises this, while at the same time choosing the right objective to be accountable for. this, of course, does not mean that we ignore credit and asset prices. movements in these variables can affect the future path of the economy and the evolution of inflation. so we need to study them closely, understand the forces driving their movements, and the risks that they pose. but they are not appropriate targets for monetary policy. i hope that what i have just said does not leave you with the impression that we have a very narrow interpretation of our responsibilities. if that has happened, it is unintentional and is because i have only spoken so far about our monetary policy responsibilities, but we also have a duty to do what we can to ensure financial stability. financial stability means the avoidance of financial shocks that are large enough to cause economic damage to the real economy. it should not be forgotten that many central banks, including most notably the us federal reserve, owe their origins to the desire to avoid financial crises - the monetary policy functions only came later in their life. at the reserve bank, our financial stability responsibilities are handled in several ways. for a start, we run the high - value wholesale payments system,

, fell below 50 for the first time since may 2020. the index for new orders fell especially sharply and the employment index fell further into contractionary territory. clearly, economic activity among these businesses is slowing, but it is too soon to say by how much. previous months when the overall index fell below 50 were followed by sustained periods above that threshold, so we will have to wait and see what this current reading means for a slowing in this sector. meanwhile activity among manufacturing businesses has been fairly steady this year after contracting from late 2022 through 2023. new orders and most other readings are close to 50. the labor market one development in the past few months with significant implications for monetary policy is that labor supply and demand have finally come into rough balance. demand of workers exceeded supply for several years, contributing significantly to high wage inflation, which inevitably fed through into services inflation. supply was damaged after the pandemic, as many people left the workforce to care for family, older workers retired, and immigration fell significantly. at the same time, the economy grew solidly, and labor demand rose at a brisk pace. the imbalance in the labor market was reflected in a surge in job openings, with two vacant jobs for each worker counted as looking for work, nearly double the rate prior to the pandemic. there was also a surge in the number of people quitting their jobs, most of them to take a higher - paying job elsewhere. but now that situation has changed dramatically. labor supply has improved, with a higher labor force participation rate and much higher rates of immigration. not long ago, i would have been concerned that the high levels of job creation reported recently were 2 / 6 bis - central bankers'speeches inconsistent with a labor market coming into better balance, but the high pace of immigration in recent quarters helped accommodate the strong demand. and, more recently, as restrictive monetary policy has put downward pressure on aggregate demand, the demand for labor has moderated. the unemployment rate has risen from a 50 - year low to 4. 1 percent, still low in historical terms but the highest since late 2021. in may, the ratio of job vacancies to unemployed people stood at 1. 2, which was the average in the year before the pandemic. the share of workers who quit their jobs is now slightly below the prepandemic level. one indication that this is a loosening, rather than a weakening, of the labor market is that layoff rates have