. g., hansen and sargent ( 2008 ) ) and brainard conservatism ( brainard, 1967 ). on the voyage, such as russia ’ s invasion of ukraine, energy price spikes, and weather - related food price shocks. by early - 2022 the navigational signs had changed. the risk of a deep and sustained recession had receded, and persistent inflation had begun to permeate the economy. inflation expectations had risen significantly. the biggest risk to our objectives was now that of high inflation becoming entrenched, and the economic and social costs that would be required to subsequently bring it back down. we soon reversed our quantitative easing programme. one of our key navigational stars – the estimated neutral interest rate – was a long way north of where we sat, so we again moved swiftly to get back on course. again, the mpc steered policy forcefully to avoid the most serious risk – the worst - case – by tightening our policy setting to return inflation to target. this meant risking a shallow recession in the short - term to avoid the risk of deeply entrenched inflation, and a much deeper recession in the long term. a monetary policy ‘ mutiny ’ needed to be headed off, with inflation expectations rising and price setting behaviour changing. i am pleased we are now in relatively calmer waters and the crew and passengers are believing again in low and stable inflation. communicating in an uncertain environment central bankers are given great responsibility, and to earn the trust to lead we need to display perspective, empathy and courage. we cannot rest on our legal remit alone or over - rely on the credibility earnt over recent decades of inflation targeting. when it comes to our decisions, we must communicate them clearly and be humble and transparent about the uncertainties we face. a key part of monetary policy communication is often published central projections that summarise and communicate changes in our views on the economic outlook from meeting to meeting. because central projections offer a simple narrative they draw a lot of focus by financial audiences. on their own, however, a central projection can create an unhelpful sense of accuracy, which does a poor job of communicating uncertainty and contingency. as a navigator, imagine drawing a single line on your ocean map to chart your voyage, knowing only limited things about your location, the weather and currents ahead, and the performance of your boat. it is blindingly obvious that this line is very unlikely to be the eventual course followed for the rest of the journey

alan bollard : easy money – global liquidity and its impact on new zealand speech by dr alan bollard, governor of the reserve bank of new zealand, to the wellington chamber of commerce, wellington, 15 march 2007. * 1. * * what has been happening to global liquidity? globalisation has had major effects on the new zealand economy over the last decade or two. monetary policy has certainly not been immune. some of the impact has been very helpful to us in our primary task of achieving price stability. we have enjoyed a useful disinflationary impact from the flood of cheap manufactures available from china and other newly industrialising countries. we have enjoyed the benefits of trading with a buoyant world that has been enjoying good stable growth rates with stable prices. more recently however, we have had to focus on a related phenomenon which has had some unanticipated effects : the growth of global liquidity. global liquidity has increased dramatically over recent years. in our part of the world, this reflects : • a surplus of savings relative to investment in the east asian and oil - exporting countries ; • new players, new products, new transactions and markets ; and in particular • the impact of the “ carry trade ” fuelling investment flows into a range of markets. a feature of the period of relatively strong growth in the world economy over the past several years has been large and growing financial imbalances among the world ’ s major economies. the us current account deficit has increased significantly over this period, although it has stabilised over the past year relative to the size of the us economy. meanwhile, most east asian countries have consistently run current account surpluses since recovering from the 1997 / 98 financial crisis, when many experienced deficits. more recently, the rise in oil prices has underpinned a substantial increase in the surpluses of the oil exporting nations. figure 1 : current account balances source : imf world economic outlook, september 2006 ; rbnz these relative current account positions broadly reflect the contrasting balances between saving and investment in these countries. in the case of the deficit countries – such as the us, australia and new zealand – investment has exceeded saving, with the excess savings of surplus countries financing the shortfall. excess savings relative to investment amongst the surplus countries has increased substantially since the late 1990s, led by asia, a range of developing countries and more recently the oil exporters. this has given rise to a phenomenon that us federal