‘ how have australian banks responded to tighter capital and liquidity requirements? ’, rba bulletin, june, pp41 - 50. debelle, g ( 2018 ), ‘ lessons and questions from the gfc ’, speech at the australian business economists annual dinner, sydney, 6 december. the maturity of the loans may be longer than that of the bond / swap, so a new bond / swap may be needed. berger - thomson, l and chapman b ( 2017 ), ‘ foreign currency exposure and hedging in australia ’, rba december, pp 67 - 75. as a result, despite being a net debtor nation, australia enjoys a transfer of financial wealth from abroad when the australian dollar depreciates, other things equal. debelle g ( 2017a ), ‘ how i learned to stop worrying and love the basis ’, speech at the bis symposium : ‘ cip – rip? ’, basel, 22 may. i direct you to any undergraduate finance textbook for a worked example that, under simplifying assumptions, demonstrates how to exploit the basis to earn a risk - free profit. borio c et al ( 2016 ), ‘ covered interest parity lost : understanding the cross - currency basis ’, september, pp 45 – 64. available at < https : / / www. bis. org / publ / qtrpdf / r _ qt1609e. pdf >. kearns & patel ( 2016 ), ‘ does the financial channel of exchange rates offset the trade channel? ’,, december, pp95 – 113. available at < https : / / www. bis. org / publ / qtrpdf / r _ qt1612i. pdf >. review bulletin, bis quarterly review, bis quarterly © reserve bank of australia, 2001 – 2018. all rights reserved. https : / / www. rba. gov. au / speeches / 2018 / sp - ag - 2018 - 12 - 10. html 10 / 10

a separate monetary easing policy tool and are supplementing the interest rate policy and forward guidance. in contrast, the bank applies forward guidance to qqe as a package. once the pace of the annual increase in the monetary base is set, the approximate pace of increase in jgb purchases is determined accordingly. in this sense, the pace of increase in the monetary base and that in asset purchases are treated as “ non - separable, ” as shown in chart 3. then the bank uses forward guidance to inform the public of its intention to maintain an increase in the monetary base and thus in asset purchases in the future. in other words, the bank attempts to exert downward pressure on the entire yield curve by influencing the expectations of the markets and the public about the low level of the yield curve in the future. second, the bank purchases treasury discount bills ( t - bills ) and other assets, in addition to jgbs, to meet the monetary base target. 6 moreover, it regularly conducts fixed - rate fundssupplying operations ( with a duration of mainly three months, but available up to one year ). therefore, these short - term operations exert downward pressure directly on short - term interest rates. in contrast, the federal reserve purchases longer - term treasury securities ( with a remaining maturity from four to 30 years ) and agency mortgage - backed securities ( mbss ). the downward pressure on short - term interest rates is exerted through the forward guidance. third, the bank and the federal reserve have different views on long - term inflation expectations. forward guidance issued by the federal reserve assumes that longer - term inflation expectations have been anchored at around 2 percent. however, there may be some limited concerns on the dis - anchoring of inflation expectations. therefore, one of the main tasks for the federal reserve is to continue with monetary easing measures to seek economic improvement, while ensuring that the anchored inflation expectations are maintained. in contrast, the bank has not yet successfully anchored long - term inflation expectations at around 2 percent. thus, the bank must help transform the deflation - oriented mindset of all economic entities and then increase inflation expectations to a higher level of 2 percent. therefore, the threshold used for forward guidance concentrates solely on “ 2 percent ” or “ maintaining 2 percent in a stable manner. ” fourth, federal reserve forward guidance includes employment - related thresholds. it has a dual mandate of promoting price stability and maximum employment, so the reason for this is clear.