markets have generated many benefits for the region, but have also enhanced linkages with global financial and bond markets, thereby inducing changes in capital flows. the resultant greater volatility of exchange rates and overvaluation of the currency, and their adverse impacts on the economy have been pointed out as serious concerns. as a result, some economies occasionally set a low policy interest rate in response to a decline in the global interest rate. • this, however, might lead to a greater positive output gap in the economic expansionary phase, thereby overheating the economy and promoting rapid credit growth and increasing inflationary pressures. this may not only amplify the boombust business and financial cycles, but also deteriorate the current account balance. it may also incur the risk of undermining a central bank ’ s credibility by failing to fulfill its price stability mandate in the inflation - targeting economies. going forward, economies in the region may need to prepare for more volatile interest rate movements in the face of global interest rate hikes as the global economy gradually recovers. this in turn may provide these economies with more room to conduct an independent monetary policy. bis central bankers ’ speeches • fourth, to cope with excessive capital flows and associated accumulation of financial imbalances, economies in the region frequently use a wide range of macroprudential policy measures. their effectiveness depends largely on countryspecific economic and financial market circumstances. questions such as what macroprudential measures should be taken to cope with financial imbalances, or what is the correct balance between macroprudential policy and monetary policy, remain unsettled, and an international consensus has not yet been formed. • going forward, further discussions are expected among central banks, regulatory institutions, and other policy makers on the issue of how to achieve price stability, sustainable economic growth, and financial stability. i hope that such discussions, through sharing each other ’ s experiences and lessons learnt from the past, will lead to some useful insights into monetary policy conduct implications. this concudes my speech. thank you very much for your kind attention. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches

core cpi ( chart 6 ). many central banks assess the underlying inflation trend by monitoring the core cpi as well. each of the six relevant central banks now places importance on short - term policy interest rate and uses it as the main operational target for monetary policy. as a first mover, new zealand initially adopted a relatively rigid framework and attempted to meet price stability within a short time span. however, such a tight monetary policy led to a sharp appreciation of the new zealand dollar and forced substantial adjustment burdens on the export and import substitution sectors. consequently, new zealand decided to increase flexibility over time by allowing a deviation from the inflation target range of 1 – 3 percent and meeting the target range on average over the medium term. its 1 – 3 percent target range has been fixed since 2000. in addition, since 2012, its inflation target definition has been clarified further by adding the expression “ with a focus on keeping future average inflation near the 2 percent target midpoint ” to the existing 1 – 3 percent target range. similarly, australia ’ s inflation target range of 2 – 3 percent is also defined as a medium - term average. in east asia, south korea set its inflation target range for 2013 – 2015 at 2. 5 – 3. 5 percent under a medium - term inflation - target setting system adopted in 2004 ( prior to that, it set an inflation target annually ). in 2012, indonesia set its inflation target range at 4. 5 percent ±1 percentage point for 2012 – 2014, and 4 percent ±1 percentage point for 2015. thailand narrowed its inflation target range from 0. 0 – 3. 5 percent to 0. 5 – 3. 0 percent in 2009, and thereafter has maintained this target, although its validity is examined every year. the inflation target range in the philippines is set at 4 percent ±1 percentage point for 2011 – 2014 and at 3 percent ±1 percentage point for 2015 – 2016 under a medium - term inflation - target setting system adopted in 2010 ( prior to that, it set an inflation target annually ). why is the inflation - targeting framework more flexible than in advanced economies? the above observations suggest that the inflation - targeting frameworks in the asia - pacific region are more flexible than those adopted in the advanced economies described earlier. particularly, greater flexibility is demonstrated by ( 1 ) an adoption of an inflation target range rather than an inflation target point, ( 2 ) the acceptance of relatively large deviations from the inflation target, and ( 3 ) the use of relatively