volatile market dynamics. investment in human capital and systems will be a priority to keep pace with higher volatility and growing complexity of financial instruments and markets. the survey done by the official monetary and financial institutions forum – the omfif – in 2022 provides further insights in what reserves managers foresee over the next few years. most of them believe that inflation will remain high for longer or at least be more volatile. the majority of reserves managers indicated they will not make any fundamental change to their investment approach. but they can become more active and opportunistic in the day - to - day management of reserves. portfolios will be designed to weather economic turmoil, such as by extending duration. they will be more prudent and will put in greater efforts into capital preservation and to ensure liquidity of the portfolios. ladies and gentlemen, capital preservation and liquidity remain the prime investment objectives of reserve management. return maximisation has been only a secondary objective. however, the challenges of falling reserves and exchange rate pressures in recent years have drawn greater focus on return, particularly in emerging economies, as evidenced by recent reserve management surveys. although safety and liquidity will remain the core principles of investment frameworks, a rise in the importance of return over the coming years is anticipated. the increased focus on return is already more apparent among emerging economies. for instance, some central banks have to generate further return to make up for growing operational and funding costs. we have seen a steep and rapid rise in interest rates in the past year or so. going forward, the search for better yielding avenues may prompt more central banks to expand their universe of eligible asset classes, including venturing into emerging market debt and equities. the integration of new asset classes as well as currencies in the reserve portfolio and the need to access new markets will require further operational enhancements and strengthening of the governance framework. central banks in our region are increasingly hiring the services of external managers to manage complex investment solutions that require specialised skills and infrastructure. ladies and gentlemen, investors generally mitigate risks to portfolios by diversifying into assets classes that have negative or low positive correlations. however, with the change in market dynamics since the global financial crisis, the traditional correlations across asset classes have broken down. this phenomenon is nowadays more pronounced across diverse asset classes and is anticipated to persist in the years ahead. reserve managers will have to make up for the loss of diversification with new investment strategies. recent surveys have revealed a

. an important element in the growth outlook is macroeconomic stability, which is where monetary policy makes its contribution. 4. the role of monetary policy the mandate of the bank is to achieve low inflation in the interest of sustainable economic growth and development. a low inflation environment contributes to growth and development by providing a more certain basis for investment decisions in the economy, and lowering overall risk. the inflation - targeting framework adopted in february 2000 has contributed to the reduction of inflation to low levels. for the past 32 months, cpix inflation ( i. e. headline inflation excluding mortgage interest cost ) has remained within the target range of 3 - 6 per cent, despite strong output and expenditure growth in the economy, and significantly higher international oil prices. furthermore, there is evidence that inflation expectations have become entrenched at levels consistent with the target. these developments have allowed for nominal interest rates to fall to levels last seen in the late 1970s. between june 2003 and april 2005, the repo rate was reduced by a total of 650 basis points, although at the most recent monetary policy committee meeting earlier this month, the repo rate was raised by 50 basis points to 7, 5 per cent per annum. real interest rates have also come down somewhat and have become less variable. the recent repo rate increase, the first since september 2002, was motivated by the deteriorating risks to the inflation outlook. apart from adverse oil price developments, the concerns of the committee also centred around the continuing high levels of consumer demand, which have been reflected in rising levels of credit extension to the private sector and also the larger - than - usual current account deficit on / of the balance of payments. twelve - month growth in bank loans and advances extended to the private sector measured 23, 1 per cent in april compared to 24, 3 per cent in march, while asset - backed credit extended to the private sector continued to grow strongly at a year - on - year rate of 27, 2 per cent in april. although there were few signs of inflationary consequences at that stage, the impact was being felt in the deficit on the current account of the balance of payments which had expanded to 6, 4 per cent of gdp by the first quarter of this year. as we observed in our latest monetary policy review, current account deficits are a reflection of higher domestic expenditure and are not in themselves inflationary. there is however a possible risk to the exchange rate if the deficits are perceived to be unsustainable, particularly if the