has shifted down more so than in these other economies over the past year. graph 4 as well as helping to reduce risk - free rates, the effect of the easier stance of monetary policies is evident in other financial markets. corporate bond yields have declined this year ( graph 5 ). this reflects both lower government bond yields and lower corporate bond spreads. one possible interpretation of the low level of corporate bond spreads is that investors'concerns about corporate defaults are about as low as they have been for quite a few years. that is somewhat at odds though with significant concerns about downside risks to global growth. so it's possible that market participants are placing considerable faith in the willingness and ability of central banks to respond to adverse shocks. alternatively, record low risk - free rates may be encouraging investors to search for yield, and so they may be underappreciating and underpricing the risks to corporate earnings. graph 5 also, for much of this year, equity prices have been supported by the effect of the changing stance of monetary policies on sovereign bond yields ( graph 6 ). in part, this reflects the rise in the discounted value of future corporate earnings arising from lower risk - free rates. at the same time, market analysts still expect good growth in earnings next year, despite some slowing in earnings growth this year and notwithstanding rising downside risks to global growth. again, this suggests that participants judge that adverse shocks to growth are either likely to have only a modest effect on corporate earnings, and / or that policy accommodation will help to mitigate the effects of any adverse shocks to growth. however, as seen during the recent ratchetting up in the us – china dispute, asset prices could fall quickly if market participants become more concerned about its potential to weigh on growth of the global economy and corporate earnings. graph 6 the combination of all of these changes has underpinned a general easing in global financial conditions through the course of this year. changes in australian financial conditions the transmission to australian financial conditions of easier monetary policy both here and globally can be traced through the effects on funding costs, and on the australian dollar. funding costs – banks, businesses and households the recent reductions in the overnight cash rate in australia – and the decline in interest rates right along the yield curve – have reduced the costs of funding to historical lows for banks, businesses and households. banks'funding costs have declined across the board ( graph 7 ). the cost of funding in short - term money markets has declined

from these decades is that bringing inflation back down again after it becomes ingrained in people ’ s expectations is very costly and almost certainly involves a recession. this next graph shows the inflation and unemployment rates during the disinflation episodes in australia and the united states after the period of high inflation ( graph 2 ). in both cases, bringing inflation back down required high interest rates and was associated with a deep recession and a rise in the unemployment rate of at least 5 percentage points. the high unemployment then persisted for years and left deep scars in the labour market and damaged our communities. it was very costly. r e s e r v e b a n k o f au s t r a l i a graph 2 disinflationary episodes * % united states % australia inflation unemployment * shading indicates labour market downturns, from trough to peak in unemployment rate. sources : abs ; rba ; refinitiv this experience lies behind the determination of the world ’ s central banks to ensure that the current period of high inflation is only temporary. the evidence shows that economies work better with low inflation and that once inflation becomes entrenched, it is very costly to stamp it out. it is for these reasons that the reserve bank board is resolute in its determination to return inflation to target and we will do what is necessary to achieve that. our central forecast is that inflation will peak later this year at around 8 per cent, and then decline gradually over the next couple of years to be a little above 3 per cent by the end of 2024 ( graph 3 ). graph 3 headline inflation * year - ended % % 70 per cent interval 90 per cent interval - 2 - 2 * confidence intervals reflect rba forecast errors since 1993. sources : abs ; rba there are a number of factors that lie behind this expected decline in inflation. the first is that the covid disruptions to supply are being resolved : delivery times and shipping costs have declined and the pressure on goods prices is abating. the second is that commodity prices have stabilised and, in many cases, have declined to be back around their levels at the beginning of the year ; in time, the effect of this will be evident in consumer prices. and third, the increase in interest rates here and around the world will result in slower growth in aggregate demand. in time, this means less pressure on capacity and lower inflation. as always, there is uncertainty around this outlook. we can ’ t rule out