- term, a more expansionary fiscal stance also has the potential to aggravate the current account deficit as well as increasing the work monetary policy has to do in order to contain inflation. these pressures will need to be borne in mind as the incoming government considers its fiscal options. we are conscious that the eventual adjustment of the high current account deficit could make the job of maintaining price stability more difficult in these circumstances. in the short - term, an exchange rate adjustment has the potential to boost inflation via its direct effect on tradables prices. how problematic this might be for monetary policy would largely depend on the timing and magnitude of the exchange rate adjustment, which is something over which the bank has little control. a falling exchange rate in the context of continued strength in domestic spending would tend to generate stronger inflation pressures. conversely, the inflationary effects of an exchange rate decline that occurred following a cooling in domestic demand are likely to be more easily managed. as far as possible, the bank will not stand in the way of an exchange rate adjustment, accepting that a short - term boost to tradables inflation may be an unavoidable consequence of adjustment. clearly, a more orderly and gradual exchange rate adjustment would pose less of a challenge for monetary policy. however, whatever the adjustment path, our job will be to focus on medium - term inflation stability. the extent to which monetary policy will need to continue leaning against domestic inflation pressures will largely depend on the spending and savings behaviour of households. 5. conclusion strong household demand associated with a buoyant residential property market has contributed to an increase in inflation pressures and a widening of new zealand's current account deficit. the reserve bank remains focussed on ensuring that the inflation outlook remains consistent with the medium term target whilst recognising the macro - economic adjustments that are likely to occur in the face of a large and unsustainable current account deficit. we are concerned to see that, as far as possible, such adjustments occur in as orderly a manner as possible. 7 / 7

federal reserve system generates spillovers to euro area real activity and inflation that are comparable to the effects of this tightening on the us economy. estimates are obtained based on a sample spanning 1991 to 2019, using high frequency - based us monetary policy shocks ( sum of conventional, odyssean forward guidance and quantitative easing ) in monthly smooth local projections. for example, a one standard deviation us monetary policy tightening shock contracts us and euro area equity prices about equally by up to 0. 75 % over a two - year horizon. see lane, p. r. ( 2023 ), “ the euro area hiking cycle : an interim assessment ”, speech at the national institute of economic and social research, 16 february. 19. a tightening in the united states also results in an appreciation of the us dollar, which increases pressure on other central banks to tighten in order to avoid the depreciation of their currencies against the dollar leading to a deterioration of their domestic inflation outlooks. this was particularly noteworthy in the context of the energy shock, because the price of energy commodity imports is often denominated in us dollars. 20. dieppe, a. and brignone, d. ( 2022 ), “ synchronised interest rate hikes, spillovers and risks to global growth ”, voxeu, 14 november ; panetta, f. ( 2022 ), “ mind the step : calibrating monetary policy in a volatile environment ”, op. cit. ; and obstfeld, m. ( 2022 ), “ uncoordinated monetary policies risk a historic global slowdown ”, realtime economics, peterson institute for international economics, 12 september. 21. the decline in m1 largely reflects shifts away from the unusually large stock of overnight deposits towards other less - liquid but better - remunerated instruments. the sharp deceleration in m3 is driven by the run - off of the eurosystem balance sheet and the sharp slowdown in credit. 22. ecb ( 2023 ), euro area bank lending survey, january. 23. panetta, f. ( 2022 ), “ normalising monetary policy in non - normal times ”, op. cit. 24. these crises were triggered by specific events ( the announcement of a fiscal package in the united kingdom and a shift in sentiment among silicon valley bank ’ s depositors – tech companies, venture capital and high net worth individuals – that exposed large unhedged interest rate risks