almost 5 percent and reached a 14 - year high as financial markets assess the implications of a possible large fiscal stimulus for economic growth, inflation and the level of outstanding us government debt. ten - year government bond yields have increased by 40 basis points in new zealand ( figure 8 ). figure 8 : 10 year government bond yields 4. 5 % differential ( rhs ) nz us 4. 0 3. 5 bps 3. 0 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 jan - 15 may - 15 sep - 15 jan - 16 may - 16 sep - 16 source : bloomberg, rbnz the factors behind the rise in us rates have increased market expectations that the federal reserve will raise policy rates at its meeting on 13 - 14 december 2016, and tighten more rapidly in 2017. prospects of stronger growth in the us and the resulting spillovers through trade, commodity prices and relative exchange rate movements should be positive for new zealand and a welcome development from a monetary policy perspective. however, while the 5 percent appreciation in the us dollar in recent weeks is helpful for new zealand exporters, the twi currently lies above its level in june 2015, despite the terms of trade being 6 percent lower and seven reductions in the ocr. as has been the case in several other countries, monetary policy has been made more challenging in new zealand by low global inflation and zero or negative policy rates in several major economies. this has put downward pressure on our interest rate structure and contributed to asset price inflation and upward pressure on the new zealand dollar. this trend may finally be turning. another major change is the 7. 8 strength kaikoura earthquake. early indicators are that reconstruction work, including by government, could be in the order of $ 3 – $ 8 billion, or around 1 - 3 percent of gdp. this is much smaller than the $ 40 billion associated with canterbury reconstruction, and would occur at a time when the domestic economy is at or near full capacity. the supply disruptions are unlikely to have a major impact on overall economic growth. some increase in construction cost inflation is likely as this is already running at 7. 9 percent in auckland and 6. 3 percent nationally due to capacity bottlenecks within the sector. increases in freight costs are also expected. at this stage these developments do not cause us to change our view on the direction of monetary policy as outlined in the november mps. we expect monetary policy to continue to be accommodative, and

access to credit for households and companies is tightened even without the riksbank having raised the interest rate. the fact that it is more expensive and more difficult to borrow affects economic activity. in a situation where the markets are affected by uncertainty, it is also possible that the interest rates faced by the general public do not follow suit when the riksbank cuts the repo rate. one can say that the repo rate then becomes a blunter instrument than normal and that its impact is weaker. such a situation could therefore require more powerful adjustments to the interest rate than would otherwise have been necessary. measures to ensure the financial system functions more normally it is thus very important from several aspects that the financial system functions well. and it is the riksbank ’ s task, as written in law “ to promote a safe and efficient payment system ”. this means in practice that the riksbank regularly analyses risks and threats to the stability of the swedish financial system. the purpose is to detect changes and vulnerabilities that can lead to a serious crisis and in various ways to prevent such a situation from arising. we also maintain a good level of crisis preparedness and carry out different types of crisis exercise. this means that we are well prepared to act if a situation arises whereby stability is threatened. when shocks occur in the financial system we have different tools for managing the situation. an important part of this is providing information, highlighting risks and conducting a dialogue with financial market participants. the riksbank also has the possibility to supply the system with liquidity or to provide liquidity to financial companies under the supervision of finansinspektionen, the swedish financial supervisory authority, that are solvent but lack sufficient liquidity to manage their payments. this gives the riksbank a central role in a financial crisis situation which is often connected with this type of problem. it is usually said that the riksbank can in such cases act as lender of last resort. other authorities working with these issues in different ways are finansinspektionen and the swedish national debt office. as those of you here are well aware, the riksdag and the government also contribute. this can be by formulating legislation and regulatory frameworks, or by intervening with measures in those cases where those of the authorities do not suffice. one example is the stability plan for the financial system decided by the riksdag just over two weeks ago. this was a measure that the riks