inflation rose to 30 percent. the increase in the cbr is intended to influence other interest rates in the economy, including bank lending rates ; otherwise it would not work to curb inflation. we have already seen commercial banks raise their prime lending rates. the average prime lending rate of the commercial banks is currently just under 23 percent compared to 21 percent in january of this year. higher interest rates will reduce borrowing by the private sector and thus dampen demand for goods and services in the economy, which will help to alleviate inflationary pressures. in addition, raising the cbr has a signalling effect which we hope will influence the expectations of the private sector. if private sector agents expect that inflation will be kept under control, actual increases in wages and prices are more likely to be moderate. the increase in the cbr and consequent reduction in the growth of demand will also have a temporary impact on the growth of real output. hence we now expect that real growth in the current financial year will be lower than the 5. 8 percent forecast at the time of the budget in june, and will probably be around 5. 4 percent. unfortunately, if we want to control inflation in the face of an adverse supply price shock, some costs in terms of lower real growth cannot be avoided. however, we expect that real gdp growth will climb towards 6 percent over the medium term. let me now discuss the sectoral impacts of the exchange rate depreciation, which differ between the traded goods and the non - traded goods sectors of the economy. the traded goods sectors are those which produce for export or which produce goods that compete against imports in the domestic market. what matters for the competitiveness of the traded goods sectors is the real effective exchange rate, which is a measure of changes in the nominal exchange rate of the ugandan shilling against the currencies of our trading partners adjusted for differences in inflation rates. over the course of 2014 / 15, the real effective exchange rate depreciated by about 13 percent, thereby boosting the competitiveness of the traded goods sectors of our economy. this illustrates one of the most important benefits of a flexible exchange rate ; it helps the economy to adjust to external shocks. although the real effective exchange rate is not the only factor which affects the competitiveness of traded goods industries, the depreciation is still important, because it strengthens the price incentives facing traded goods industries. we need to strengthen the performance of our traded goods industries. in the six years since the

alan bollard : keeping inflation anchored during economic recovery speech by dr alan bollard, governor of the reserve bank of new zealand and mark blackmore, special adviser, economics department, to the taranaki chamber of commerce, new plymouth, 19 august 2010. * * * the main theme of my commentary today is inflation during the recovery, what we expect to happen with the forthcoming increase in gst and what it means for monetary policy. the new zealand economy is into its second year of recovery with much of the ground lost during the recession already made up. the economy has been growing since the june quarter of 2009 and we are now in this september quarter in the sixth quarter of growth. initially growth was very muted but it picked up a little momentum towards the end of last year. compared with some past recoveries this is certainly not a fast or robust one. so far, it is comparable with the initial slow rebound from the 1991 recession. it lags behind the 1998 / 99 recovery from the east asian crisis, which is probably freshest in most peoples ’ minds. we should not really be surprised by the gradual nature of the recovery. the global shock that hit us was, something like a once - in - a - generation event. we also still have to work off some of the excesses of the past expansion, such as high levels of private indebtedness along with reducing the fiscal deficit. these will remain a drag on growth for some time yet, as they are in a number of oecd countries. as a result the recovery still has some fragility about it. we do, however, expect gdp growth to continue, with the emphasis on export growth as household and business spending remain subdued. this outlook and the associated policy implications will be reviewed over coming weeks as we prepare the september monetary policy statement. what does this imply for inflation? inflation has been well contained recently, with consumer prices increasing 1. 8 percent in the 12 months to the june quarter this year. this marks five consecutive quarters where annual consumer price inflation has been at or close to the midpoint of the reserve bank ’ s 1 to 3 percent inflation target. it is worth noting that this contained inflation picture comes after a period of very strong growth in the prices of domestic assets and international commodities. both played a major part in the strong inflation pressures new zealand experienced in the mid - 2000s. how does this inflation performance compare with other countries? globally, consumer price inflation has reduced as a