dovish. that would represent a return to the first extreme incentivising borrowing. both these extremes have perverse effects. the impacts of the extreme policies and the parallel trends in the economy are assessed by duffie ( 2023 ) for the us financial market and, for example, by grimm, laeven and popov ( 2023 ) for the euro area. the impacts on global trade are summarised by alfaro and chor ( 2023 ). it would be inappropriate for me to evaluate the polices of other central banks, but it would be a mistake not to critique the past policy of the cnb. the main problem in the czech republic was the rapid switch from one extreme to the other – from ultra - low rates and efforts to trigger inflation to ultra - high rates and efforts to rein inflation back in again. everything comes at a cost. a rapid increase in rates doesn't always mean lower inflation in the future. you can't put right the mistakes made in past years in one fell swoop. this is discussed in the classical literature – see, for example, friedman and lucas ( 1976 ). the big lesson for me is that we will try not to repeat 2017 at the cnb. the interventions made at that time to weaken the koruna and raise inflation led within four months to an increase in the cnb's balance sheet, or rather in the banking sector's liquidity. it increased from czk 1, 300 billion in december 2016 to czk 2, 300 billion in 2 / 4 bis - central bankers'speeches april 2017. this contributed to us later having the highest core inflation in the eu. each central bank should start with itself, with self - reflection. my discussions with colleagues from the fed, the ecb, the bank of england and the reserve bank of new zealand confirmed me in the view that our models, should, like theirs, be audited and critically assessed. professor at the university of chicago and former governor of the reserve bank of india raghuram rajan ( rajan, 2023 ) said : " central banks have constrained their own policy space with asymmetric and unconventional policies, ostensibly intended to deal with the policy rate touching the lower bound. they have triggered a variety of imbalances that are making fighting inflation harder today. " more purposeful and less interventionist central banks would probably do better than a high - inflation, high - debt, low - growth world

return to quantitative easing sometime in the future, should circumstances require that. given the outlook for the economy and inflation, further normalisation of interest rates will be required. in making its decisions, the board will continue to be guided by the evidence on both inflation and the labour market. we will also continue to be flexible and responsive to changing circumstances. we will do what is necessary to ensure that inflation outcomes are consistent 2 / 3 bis central bankers'speeches with the medium - term inflation target. this does not require an immediate return of the inflation rate to target because our monetary policy framework intentionally allows for flexibility and some variability in inflation from year to year. but we do need to ensure that the inflation rate tracks back to the target range of 2 to 3 per cent over time. this would be harder to achieve if the inflation psychology in australia were to shift in a durable way due to the recent higher inflation outcomes. the decision to move today, rather than wait, should help on this front. in making our decisions over coming months, we need to navigate through some considerable uncertainties. globally, it remains uncertain how the supply - side problems will be resolved and developments in ukraine are unpredictable. another source of uncertainty is how household spending in advanced economies responds to the decline in real wages, as wages growth has not kept pace with the higher inflation. also, we have no contemporary experience to guide us with how labour costs and prices in australia will behave at an unemployment rate below 4 per cent. it is also relevant that households have much more debt than previously, and many households have never experienced rising interest rates. so this is another aspect that we will be watching carefully. notwithstanding these uncertainties, i expect that further increases in interest rates will be necessary over the months ahead. the board is not on a pre - set path and will be guided by the evidence and data as it takes the necessary steps to achieve the medium - term inflation target and support full employment in australia. thank you for listening. i am happy to answer your questions. 3 / 3 bis central bankers'speeches