in the size of the central bank balance sheet as well as for increases in the policy rate. 3 some estimates suggest that the spillovers of monetary policy surprises between more tightly linked advanced economies such as the united states and europe could be about half the size of the own - country effect when measured in terms of relative changes in local currency bond yields. 4 in contrast, spillovers through exchange rate channels tend to go in opposite directions. the federal reserve's broad nominal u. s. dollar index has appreciated over 10 percent year to date. 5 on balance, dollar appreciation tends to reduce import prices in the united states. but in some other jurisdictions, the corresponding currency depreciation may contribute to inflationary pressures and require additional tightening to offset. we are attentive to financial vulnerabilities that could be exacerbated by the advent of additional adverse shocks. for instance, in countries where sovereign or corporate debt levels are high, higher interest rates could increase debt - servicing burdens and concerns about debt sustainability, which could be exacerbated by currency depreciation. an increase in risk premiums could kick off deleveraging dynamics as financial intermediaries de - risk. and shallow liquidity in some markets could become an amplification channel in the event of further adverse shocks. 2 / 5 bis - central bankers'speeches for some emerging economies, high interest rates in combination with weaker demand in advanced economies could increase capital outflow pressures, particularly commodity importers facing higher commodity prices and weaker exchange rates. and these pressures would be particularly challenging for borrowers with currency mismatches between their assets and liabilities. this is especially true at times when fiscal, macroprudential, and monetary buffers are more limited. fiscal and monetary policy were both supportive in response to the pandemic, and both were naturally expected to reverse course as the recovery gathered steam. but the advent of the war has led to a significant hit to real incomes from large price increases in energy and other commodities in some of the most severely affected economies. with respect to macroprudential buffers, nearly all of the jurisdictions that built countercyclical capital buffers before the pandemic released those buffers at the outset of the pandemic, and the buffers have not been fully replenished so far. a european central bank analysis concluded that the release of capital buffers increased headroom for banks relative to not only their regulatory thresholds, but also their internal

lael brainard : global financial stability considerations for monetary policy in a high - inflation environment speech by ms lael brainard, member of the board of governors of the federal reserve system, at " financial stability considerations for monetary policy ", a research conference organized by the board of governors of the federal reserve system and the federal reserve bank of new york, new york city, 30 september 2022. * * * i want to start by thanking anna kovner, rochelle edge, and bill bassett for organizing this conference. the current global environment highlights the importance of having strong analytic and empirical foundations to understand financial stability considerations for monetary policy, and the research presented today will help strengthen those foundations. 1 the global environment of high inflation and rising interest rates highlights the importance of paying attention to financial stability considerations for monetary policy. as monetary policy tightens globally to combat high inflation, it is important to consider how cross - border spillovers and spillbacks might interact with financial vulnerabilities. inflation is very high in the united states and abroad, and the risk of additional inflationary shocks cannot be ruled out. in august, cpi ( consumer price index ) inflation on a 12 - month basis was 8. 3 percent in the united states, 9. 9 percent in the united kingdom, 9. 8 percent in sweden, 9. 1 percent in the euro area, 8. 7 percent in mexico, 7. 0 percent in canada, and 5. 7 percent in korea. central banks facing high inflation are tightening monetary policy rapidly to damp demand and bring it into alignment with supply, which is constrained in a variety of sectors. the process of resolving imbalances will be easier the more supply improves in markets for commodities, labor, and key intermediate inputs, as is generally expected, but there is a risk that supply disruptions could be prolonged or aggravated by russia's war against ukraine, covid - 19 lockdowns in china, or weather disruptions. russia's war against ukraine has generated spikes in prices for energy, food, and agricultural inputs. most recently, inflation in europe was pushed higher by russia's cessation of natural gas deliveries through the nord stream 1 pipeline, creating hardships for households and risking disruptions for some industries in the affected countries. china's covid lockdown policy could also lead to supply disruptions if cases again increase. separately, weather conditions in several areas, including china, europe, and the united states, are exacerbating