of the inflation target is the most appropriate or that even that is the most appropriate framework for monetary policy? what changes could be contemplated? those questions are going to be addressed in other papers at this conference. but let me raise some here and discuss issues worth considering around each of them. the first is the role of financial stability in an inflation - targeting framework. the reserve bank research conference last year considered this issue at some length. 17 as i said earlier, financial stability is now articulated in the statement on the conduct of monetary policy. i talked about this issue at the bank of england18 last year and ben broadbent is addressing it at this conference. one question that arises is how the financial stability goal interacts with the inflation target. is it a separate goal that sets up potential trade - offs or is it aligned with the inflation - targeting goal? in the latter case, a potential reconciliation is the time horizon. when it materialises, financial instability is likely to be detrimental to inflation and unemployment / output : the global recession of 2008 and the subsequent slow recovery in a number of economies bears testament to the potential costs of financial instability ( although here in australia we didn ’ t experience this to as great an extent ). so over some time horizon, potentially quite long, the inflation target and financial stability are aligned. but translating this into monetary policy implications over a shorter time horizon is a large challenge, which still seems to me to be far from resolved. what about alternative regimes? price level targeting is one that has been considered in some countries, including canada, and has been proposed in the academic literature. 19 one argument for a price level target is that it delivers predictability of the price level over a long horizon. it is not clear to me that this is something that is much valued by society. by revealed preference, the absence of long - term indexed contracts suggests that the benefits are not perceived to be high. i struggle to think of what contracts require such a degree of certainty. to me the benefits mostly derive from having inflation at a sufficiently low level that it doesn ’ t affect decisions. that supports an inflation target rather than a price level target. one important difference is that an inflation target allows bygones to be bygones, whereas a price level target does not. in a world where there are costs to disinflation ( and particularly deflation ), the likely small gains from the full predictability of the price level that comes with a price level target are

is split into a number of individual tranches with different characteristics but equal subordination. 12 / 16 bis central bankers'speeches we have also seen what might be termed greater ‘ specialisation ’ of individual tranches. for instance, in recent years the use of one or more tranches with less common features – such as foreign currency, short term or green features – has increased. 12 this increased specialisation is consistent with issuers addressing the needs of different types of investors. all of these developments point to the evolution of the australian securitisation market over the past few years, with non - bank issuers playing an increasingly important role and non - resident investors taking an increasing share of issuance. benchmark interest rates, rmbs pricing and funding costs the increase in bank bill swap ( bbsw ) rates in early 2018 has led to a modest rise in the funding costs of both banks and non - banks. 13 however, the increase in overall funding costs has been a bit greater for non - bank issuers than for banks. this is because banks have a sizeable proportion of their liabilities – such as retail deposits – that do not reprice in line with bbsw rates. also, the bulk of non - banks ’ loans are funded via rmbs issuance, and the cost of issuance has risen by a bit more than bbsw rates ( graph 12 ). the premium over the bbsw benchmark rate has risen to the level of two years ago. at the margin, these changes mean that 13 / 16 bis central bankers'speeches non - bank issuers are not able to compete as aggressively on price for new borrowers as banks than was the case a year ago. most lenders have passed through modest increases in their funding costs to borrowers over the past few months. despite these increases, competition for new loans remains strong, and interest rates for new loans are still well below outstanding rates. so credit supply is available to good quality borrowers on good terms and there is a strong financial incentive to shop around. interest rate benchmarks for the securitisation market one final point i ’ d like to make on pricing, is that rmbs issuers and investors should be considering the implications of developments in interest rate benchmarks. in light of the issues around benchmarks such as libor ( the london inter - bank offered rate ), substantial efforts have been made to reform these benchmarks to support the smooth functioning of the financial system. bbsw rates