speech a narrow path philip lowe [ * ] governor address at the morgan stanley 5th australia summit sydney – 7 june 2023 thank you very much for the invitation to join morgan stanley ’ s australian summit. it is a pleasure to be able to join you. this morning, i would like to discuss the narrow path the reserve bank board is seeking to navigate. that path is one where inflation returns to target within a reasonable timeframe, while the economy continues to grow and we hold on to as many of the gains in the labour market as we can. it is still possible to navigate this path and our ambition is to do so. but it is a narrow path and likely to be a bumpy one, with risks on both sides. today, i would like to talk about the importance of the destination – that is, a sustainable return of inflation to target – and our strategy for getting there, including the decision yesterday to increase the cash rate again. i will then turn to some of the factors that the board is considering as it navigates the path back to 2 – 3 per cent inflation. the return of inflation to target recent inflation readings have been the highest for more than 30 years ( graph 1 ). the reasons for this are well known. they include supply - side disruptions caused by the pandemic, russia ’ s invasion of ukraine, and the large fiscal and monetary policy responses that supported economies during the pandemic. graph 1 consumer price inflation * year - ended % % - 5 * - 5 excludes interest charges prior to the september quarter of 1998 ; adjusted for the tax changes of 1999 – 2000. sources : abs ; rba. our job at the central bank is to make sure that this period of high inflation is only temporary. it is important that we are successful here. high inflation is corrosive and damages our economy. it erodes the value of money and savings, puts pressure on household budgets, makes it harder for businesses to plan and distorts investment. it makes us all poorer and hurts people on low incomes the most. and if inflation stays high for too long, it will become ingrained in people ’ s expectations and high inflation will then be self - perpetuating. as the historical experiences shows, the inevitable result of this would be even higher interest rates and, at some point, a larger increase in unemploy ment to get rid of the ingrained inflation. the board ’ s priority is to do what it can

can expect better prospects for the growth of the philippine capital market. undoubtedly, the continuing support of all financial industry players will ensure for us greater success in this endeavor. as a final note, i call on you to assist us in fostering an environment conducive to a vibrant domestic capital market. you are, undoubtedly, one of the major players in the capital market today. we will be relying on your experience in helping provide order and depth in the market. although the road ahead is considerably tough, i am confident that ab capital - armed with vision, a strong resolve and with sound leadership at the helm - will be more than prepared to meet the challenge. let us all do our share in responding to the call for building a deep, dynamic and liquid capital market a precondition for achieving sustainable economic growth. once again, happy anniversary and i wish you all more success in the years to come! comparatively lower than the 12. 7 percent npl ratio and 11. 4 percent npa ratio as of end - december 2004.