19 outbreak ; domestic spending resumed rapidly after social restrictions were eased, suggesting that a critical mass of new zealanders were sound financially ; and businesses favoured reducing the paid hours worked, rather than reducing the numbers employed, due to the temporary nature of the lockdowns ( figure 11 ). 16 the easing in monetary conditions also had a significant role to play in retaining jobs. when setting monetary conditions, the monetary policy committee was kept aware of the government ’ s fiscal policies ’ purposes and desired impacts. we were thus able to calibrate our response appropriately. coordination worked well. the most recent new zealand data shows annual consumer price inflation currently at 1. 4 % ( compared to our 1 - 3 % target range ) and the unemployment rate is at 5. 3 % ( above our estimate consistent with maximum sustainable employment ). 17 we estimate that in the absence of our recent monetary policy actions, unemployment would be higher still ( nearer 6. 0 % ), inflation expectations would have continued to decline, and the new zealand dollar trade - weighted exchange rate would have risen by around 7 %. 18 in other words, monetary policy has been effective to date in supporting both inflation and employment as intended – at least at the aggregate level. 14 ibid. 15 drawing on internal rbnz analysis, t. bohm, 2020 16 internal rbnz analysis, 2020 17 monetary policy statement november 2020 18 internal rbnz analysis, 2020 page 10 of 17 figure 11 : employment rate and hours worked source : rbnz managing the dual mandate – inflation and employment to date, there has been no need to consider any trade - off between meeting our employment and inflation targets. both employment and inflation have been below our target remit, necessitating an easing in monetary conditions. however, we have had to remain humble in our ability to both assess and influence the level of employment in the face of the covid - 19 economic shock. the covid - 19 economic impact has seen economic output across sectors of the economy, and employment, vary considerably ( figure 12 ). 19 we are seeing some sectors of the economy experience labour and specific skill shortages, while other sectors are experiencing layoffs and surplus labour. it is unlikely these supply and demand issues are going to be resolved quickly – as not all people are alike and labour mobility is constrained. people live in their communities. as a result, we are likely to see longer - term unemployment become embedded side - by - side with labour shortages at the national level. figure 12 :

pandemic on economic life is now proving less damaging. second, high energy costs are reducing the purchasing power of households and the earnings of businesses, which constrains consumption and investment. and third, shortages of equipment, materials and labour in some sectors continue to hamper the production of manufactured goods, delay construction and hold back the recovery in parts of the services sector. there are signs that these bottlenecks may be starting to ease, but they will still persist for some time. looking beyond the near term, growth should rebound strongly over the course of 2022, driven by robust domestic demand. as the labour market is improving further, with more people having jobs and fewer in job retention schemes, households should enjoy higher income and spend more. the global recovery and the ongoing fiscal and monetary policy support also contribute to this positive outlook. targeted and productivity - enhancing fiscal measures and structural reforms, attuned to the conditions in different euro area countries, remain key to complement our monetary policy effectively. 1 / 3 bis central bankers'speeches inflation inflation increased to 5. 1 per cent in january, from 5. 0 per cent in december 2021. it is likely to remain high in the near term. energy prices continue to be the main reason for the elevated rate of inflation. their direct impact accounted for over half of headline inflation in january and energy costs are also pushing up prices across many sectors. food prices have also increased, owing to seasonal factors, elevated transportation costs and the higher price of fertilisers. in addition, price rises have become more widespread, with the prices of a large number of goods and services having increased markedly. most measures of underlying inflation have risen over recent months, although the role of temporary pandemic factors means that the persistence of these increases remains uncertain. market - based indicators suggest a moderation in energy price dynamics in the course of 2022 and price pressures stemming from global supply bottlenecks should also subside. labour market conditions are improving further, although wage growth remains muted overall. over time, the return of the economy to full capacity should support faster growth in wages. market - based measures of longer - term inflation expectations have remained broadly stable at rates just below two per cent since our last monetary policy meeting. the latest survey - based measures stand at around two per cent. these factors will also contribute further to underlying inflation and will help headline inflation to settle durably at our two per cent target. risk assessment we continue to see the risks to