dominance of residential property as the banking system ’ s single largest sectoral exposure underpins the reserve bank ’ s prudential focus on housing lending risk. we pay considerable attention to the housing risk models used to determine banks ’ capital requirements and have generally adopted a conservative approach, with higher risk weights relative to international norms. consistent with this approach, we are currently reviewing the scale of housing risk weights in relation to loan - to - value ratios. we are also focussing on the additional housing - related systemic risk that might arise from credit cycles in our new macro - prudential policy regime that is currently out for public consultation. while as yet untested in new zealand, such policies are deployed in canada, switzerland, sweden and hong kong, for example. macro - prudential policies draw on existing prudential tools to limit financial system risk arising from excessive credit and asset price movements. practically, this means that additional prudential requirements may be applied for a period during credit up - cycles and then removed during down - cycles. the tools operate directly to improve the resilience of bank balance sheets and indirectly to moderate the extremes of the credit cycle. sources of pressure in today ’ s housing market we are again facing a strong housing market with median house prices having risen by 8 percent over the past year. so far, the nature of the current market is different to the boom of 2003 – 07. as seen in figure 2, the current house price pressures are concentrated in auckland and christchurch. house price inflation in the rest of the country is less pronounced, around 4 percent over the past 12 months, although there is considerable variation among districts. figure 2 : house price inflation by region ( annual percent change ) source : reinz, rbnz estimates. supply constraints in canterbury and auckland and pent up demand from first - home buyers are important factors. there is an element of investor demand and of new foreign buyers entering the market in auckland, but these factors – at least as yet – are not as influential as they were back in 2003 – 07. the relevance of housing supply constraints has been discussed in earlier reserve bank / treasury reports and, most recently, in the productivity commission ’ s report on bis central bankers ’ speeches housing affordability. 2 contributing to the current national housing shortage has been the low level of residential construction activity in recent years. from 2007 to 2011, residential investment as a share of gdp fell by 2 - and - a - half percentage points. in christchurch,

bojan markovic : recent economic and financial developments in serbia speech by mr bojan markovic, vice governor of the national bank of serbia, at the presentation of the february inflation report, belgrade, 13 february 2012. * * * ladies and gentlemen, esteemed members of the press and fellow economists, inflation continued to fall and settled at 7. 0 % in december 2011. consistent with our projections from last year ’ s inflation reports, inflation will return within the target tolerance band already in this quarter. gross domestic product growth picked up mildly in the fourth quarter of 2011, but is likely to slow down in the current year to around 0. 5 %, mainly due to the prospect of recession in the euro area. in response to subsiding medium - term inflationary pressures, the national bank of serbia has cut the key policy rate over the last nine months by a total of 300 basis points, to the current level of 9. 5 %. the future path of the key policy rate will depend on inflation factors, and in particular on the risks stemming from the international environment and the fiscal policy stance at home. chart 1 inflation projection ( y - o - y rates, in % ) chart 2 gdp growth projection ( y - o - y rates, in % ) - 1 - 3 - 5 12 3 12 3 12 3 12 3 iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv today we will present in more detail our view of past macroeconomic developments and our expectations for the period ahead. * * * public debt crisis in some euro area members is showing signs of abating. still, in anticipation of a systemic solution that would reassure investors and prevent the contagion, volatility in the financial markets persists, threatening to stall the recovery of the euro area economy and to slow growth at global level. in such an environment, international prices of most primary commodities continued to fall, moderately, with the exceptions of oil and other energy products, which edged up in the fourth quarter amid political tensions in the persian gulf. economic activity indicators point to a fall in the euro area ’ s gdp in the fourth quarter, and based on the latest forecasts, that tendency is likely to persist in 2012. growth forecasts for countries in the region, which are serbia ’ s important trade partners, have also been revised down. these developments triggered a further rise in serbia ’ s risk premium in the last quarter of 2011. and though the risk premium,