, truong, and vehbi ( 2019 ). 13 kent ( 2015 ) ; kent ( 2019 ). 14 jacob and van florenstein mulder ( 2019 ). figure 7 : monetary policy transmission15 ocr new zealand dollar exchange rate market interest rates lending rates inflation expectations deposit rates import prices debt servicing costs imports exports house prices saving borrowing consumption investment gdp employment inflation source : reserve bank of new zealand, monetary policy handbook. even with the same debt levels, lower interest rates reduce servicing costs and free up cashflow. lower interest rates will also be associated with higher asset prices, creating a wealth effect through to consumption. 16 furthermore, many of the other channels, such as the exchange rate channel, will still work regardless of debt levels. finally, it fits with recent experience that monetary policy does still have bite even in this low interest rate world. in new zealand, we lifted the official cash rate by 100 basis points over the course of the first half of 2014 to head off an expected increase in inflationary pressure. when this did not arrive as expected, the tightening in monetary policy ended up being one factor that contributed to the slowing in the economy into 2015. internationally, we have also seen the us federal reserve tighten monetary policy through to 2018, and this is one factor that has contributed to the moderation in us growth and inflationary pressure into 2019. these are ongoing examples of monetary policy continuing to play a key role in inflation dynamics. so if we think that inflation dynamics are changing and that monetary policy is still an effective tool, how are we applying that in new zealand ’ s current economic environment? 15 more on the transmission mechanism and other topics can be found in the monetary policy handbook, available at https : / / www. rbnz. govt. nz / monetary - policy / about - monetary - policy / monetary - policyhandbook. 16 wong, ( 2017 ). our august 2019 monetary policy statement as our monetary policy committee met earlier this month, our starting point was a new zealand economy where the labour market was operating near maximum sustainable employment, but annual core inflation remained persistently below the 2 percent mid - point of our target range. we discussed the slowdown in global growth and global risks that lay ahead, and how this might affect new zealand. we also addressed the loss of momentum in the domestic economy since mid - 2018, through both tempered household spending and restrained business investment. as part of the assessment, our discussion also touched on the decline that had occurred

. and the hackers came close to getting away with usd $ 1 billion. new zealand has been less exposed to cyber - heists than many other countries, ranking 18th of 19 in the list of most attacked countries in the asia pacific region ( australia is 16th and pakistan 1st ) 2. but with the landscape evolving so rapidly, it is important that the industry remain ahead of the game on cyber - security and be cautious when adopting new technologies and payment solutions. network effects are inherent in payment systems and other fmis, and result in a high degree of systemic risk. if fmis are not well managed, they can become a conduit for the contagion of shocks across the financial system. this challenge concerns central banks and other payments regulators. how can we make fmis more robust under stress, and how can we mitigate the potential contagion effects resulting from an fmi failure? international policy response international policy makers are responding to these growing risks in the fmi sector. financial regulation since the global financial crisis has been strengthened, and this is also true for fmis, particularly where systems are deemed to be systemic. many new prudential standards now apply to fmis, including the principles for financial market infrastructures ( pfmis ) 3 developed by the committee on payments and market infrastructures ( cpmi ) and the international organisation of securities commissions ( iosco ) ; the otc derivatives reforms agreed by the g20 and the key attributes of effective resolution regimes from the financial stability board ( fsb ) 4. this year has seen the first internationally agreed guidance on cyber security from the bis : guidance on cyber resilience for fmis5. many jurisdictions, particularly within the g20, are implementing these reforms. 2 / 5 bis central bankers'speeches the reserve bank ’ s response this leads me to the new oversight framework that the reserve bank and financial markets authority ( the fma ) have been developing for fmis in new zealand. the case we make for oversight is driven by potential market failures inherent in many fmis, in particular negative network externalities where operators or participants might not fully consider the wider social costs of their actions, particularly in stress situations. while the reserve bank has had responsibility for overseeing the payments system for over a decade, we believe the current legislation is no longer fit for purpose. the lack of crisis management powers and our limited ability to induce system improvements mean we are not able to fully meet our mandate of promoting a sound and efficient payments