addiction of depending on foreign savings to finance our consumption and investment. this dependency means that we have persistently needed interest rates above those in most developed economies to maintain inflation at target levels similar to those being followed elsewhere. policies that increase domestic savings, including reducing the government ’ s fiscal deficit, and to reduce the flow of resources into the public sector and other non - tradables sectors, would help to achieve a sustainable reduction in the exchange rate. ( iv ) concluding comments throughout the world, monetary policy is being conducted in a highly challenging environment. years of close to zero interest rates and massive liquidity injections in the u. s., japan and euro area are creating negative spill - overs for smaller economies such as new zealand. difficult adjustments lie ahead as the major central banks try to re - establish more normal monetary conditions and prevent inflation from moving beyond target levels. and, in new zealand, we have never had to conduct monetary policy when a major part of the economy faces a concentrated construction programme in the order of 12 percent of gdp – and insurance payouts in excess of this. various groups in our economy are under pressure from the high exchange rate, rising house prices, and those living off interest income worry about low yields. monetary policy, by itself, cannot deliver quick fixes to achieve and sustain more rapid economic growth, lower unemployment, or maintain a lower exchange rate. other policies are central for achieving these outcomes, but when they are applied, monetary policy can be supportive of them. in conducting monetary and prudential policy, the reserve bank will be consistent, open, and flexible in reflecting on new information and data. in doing so, our focus will remain on bis central bankers ’ speeches meeting the objectives in the pta and maintaining new zealand ’ s reputation for credible monetary policy outcomes and financial stability. this is the best contribution we can make to help bolster new zealand ’ s rate of economic growth and serve new zealanders. graeme wheeler bis central bankers ’ speeches

achieved annual cpi inflation within our 1 - 3 percent target range now. such a policy shift would have been inconsistent with the committee ’ s remit and led to many other severe and persistent economic challenges. the committee could have commenced its tightening cycle earlier in 2021 than it did, in order to better contain core ( domestic demand - led ) inflation pressure. however, the subsequent rise in international food and energy prices would still have led to headline cpi inflation exceeding 6 per cent now. chart 1 : cpi inflation split between ‘ core ’ and ‘ headline ’ source : stats nz. the blue bars represent ex - food and energy inflation, an internationally comparable measure of core inflation. these examples are not excuses for inflation not being at 2 percent. they highlight the extent of the economic shocks that buffeted the economy, and the importance of being forward - looking when setting policy, with flexibility in achieving our targets. the lags between our monetary policy actions and inflation outcomes remain long and highly variable. other central banks are in the same boat, and we are learning the lessons together. in an absolute sense, actual and expected inflation is too high and needs to be reduced. however new zealand is in a strong macroeconomic position relative to most oecd nations. chart 2 – international inflation and unemployment rates note : the data are sourced from the oecd database. the latest available data points have been used ; inflation data for 2022q3 for all countries, and unemployment data for 2022q3 for all countries except switzerland for which 2022q2 data is used. turkey has been omitted since it is an outlier with an exceptionally high inflation rate of 81 %. we are in the lowest quartile for both inflation and unemployment in the oecd. we have a stable and well - functioning financial system that is resilient to a wide range of interest rate and employment shocks. 3 and, as outlined in our statement released yesterday, we have resilient household, public, and business sector balance sheets in aggregate. now turning to the monetary policy statement. the monetary policy committee yesterday increased the official cash rate ( ocr ) from 3. 5 percent to 4. 25 percent. the committee agreed that the ocr needs to reach a higher level, and sooner than previously indicated, to ensure inflation returns to within its target range over the medium - term. core consumer price inflation is too high, employment is beyond its maximum sustainable level, and near - term inflation expectations have risen. _