distance between the possible, or potential, growth rate of the economy and the actual or realised rate of growth. 12 similar to the us federal reserve ( fed ), we use a taylor rule to help tell us what the interest rate level should be, given the output gap and the distance between the inflation rate we want ( the target ) and where it currently is. 13 the taylor rule tells us that we should set an interest rate that includes how quickly or slowly the economy is growing, compared to the speed at which it could be growing. if the output gap is a good representative measure of the cyclical unemployment rate, then we are fully covered – the monetary policy equation we use to get to the interest rate includes, as best we can, the relationship between those rates and employment. if we look at how the fed operates, we can take further comfort in our own framework. the fed has an inflation target of 2 %, averaged over time. this averaging introduces some flexibility to not respond to inflation shocks that are temporary, just as in our flexible inflation - targeting framework. but the fed framework does not say that when unemployment rises it will aim for a higher inflation rate. in other words, the dual mandate recognises that in the long run, the highest cyclical employment rate is consistent with low inflation. in the policy debate at present in the us, there may be a rise in cyclical unemployment to get inflation back down and to achieve a lower sustainable unemployment rate. 11 see kabundi, schalling and some ( 2016 ) and botha et al. ( 2020 ). 12 the output gap is also measured in level terms, not only the rate of growth in gross domestic product. 13 see, for instance, s de jager, m johnston and r steinbach, ‘ a revised quarterly projection model for south africa ’, south african reserve bank working paper 15 ( 3 ), august 2015. https : / / www. resbank. co. za / lists / news % 20and % 20publications / attachments / 6839 / wp1503. pdf we need also to be cautious in our current circumstances. with surging inflation in advanced economies, it is likely that the adjusted policy frameworks of recent times will shift back to simpler and clearer formulations. three takeaways from this discussion stand out. one is that inflation - targeting central banks also consider real variables such as growth and unemployment when they make monetary policy decisions. second,

provided to borrowers in sound condition at an above - market rate but with few other administrative criteria. these changes should help to make the discount window even more effective in a crisis. the trends toward consolidation and worldwide operations in the financial sector also raise some important practical questions of coordination among central banks in providing liquidity assistance should there be a situation that requires it. for example, there are basic questions regarding arrangements among central banks on matters of collateral - the types of collateral that are acceptable, details of cross - border pledging arrangements and so on. these seemingly simple questions are not always easy to answer in international settings, but central banks should be actively working to resolve these and other such issues that bear on their ability and preparedness to meet cross - border liquidity needs. conclusion central banks have a long history of working to foster efficiency and stability in the global financial system. that traditional role has become more complex over time as the institutional and market realities of the financial system have evolved. fortunately, central banks are aware of these changes and have made great progress in appropriately adapting their approaches to the execution of monetary policy, supervision, and crisis management. in our evolving financial system, however, much remains to be done. i can assure you that, as public servants, central bankers will continue to pursue these matters vigorously.