spending, especially in an environment of high levels of household debt. a pick - up in income growth, by way of ongoing increases in jobs and stronger wage growth should help here. we continue to look carefully at household balance sheets. on balance, our assessment is that there has been some containment of the build - up of risk in this area. this is a positive development. lending standards are stricter than they were previously and there has been a welcome decline in the share of interest - only loans, following measures taken by apra. housing credit growth has also slowed a bit, especially to investors. in the property market, prices are no longer rising in sydney, and have fallen for higher - priced houses. the melbourne market has also cooled somewhat. increased supply of housing, changes in the nature and availability of financing, and some reduction in foreign demand have all played a role. while the reserve bank does not target housing prices or household debt, it would be a good outcome if we now experienced a run of years in which the rate of growth of housing costs and debt did not outstrip growth in our incomes in the way that they did over the past five years. in terms of cpi inflation, the picture is pretty much the same as it was when we met six months ago. inflation, in headline and underlying terms, is still running at a little under 2 per cent. this is higher than the inflation rate a year ago, but inflation does remain low. the most recent data confirmed themes that we have been seeing for some time. strong competition from new entrants and changes in retailers ’ business models are putting downward pressure on the prices of consumer durables and groceries. the prices of many of these goods are lower than they were a few years ago. this is good news for consumers, although not for some retailers. we do expect to see some lessening of this downward pressure on prices at some point, although not for a while yet. the second ongoing theme is higher prices for utilities and tobacco. both of these have added materially to the cpi over the past year, and further increases are expected. the third theme is the subdued increase in wages feeding through into subdued price increases, particularly for a range of market services. this, too, is likely to continue for a while yet. we have discussed on previous occasions the reasons for the subdued wage increases. these 2 / 4 bis central bankers'speeches include the continuing spare capacity in the economy after the unwinding of the mining

on the federal reserve bank of new york ’ s website at www. newyorkfed. org / tripartyrepo / margin _ data. html. bis central bankers ’ speeches in their portfolios. while some investors have also apparently boosted returns by increasing leverage, we see little evidence at present that this behavior is occurring on any significant scale. second, additional funding is reportedly broadly available to traditionally levered investors such as hedge funds. to the extent that investors choose to take advantage of the readily available funding for less liquid assets, their use of leverage could rise quickly, increasing the risks of a disorderly deleveraging. a case study : the syndicated leveraged loan market i mentioned earlier that strong demand has been pushing prices higher in the syndicated loan market and figure 7 shows recent developments : inflows into this asset class have indeed been robust and prices have been rising quite rapidly. an important characteristic of syndicated loans is that they are floating rate instruments, priced at a fixed spread to libor ( the london interbank offered rate ). in an environment where interest rates may be expected to rise, this characteristic may partly explain such strong investor interest. to assess the potential financial stability ramifications of these developments, we have focused initially on two key questions. first, to what degree would financial intermediaries be exposed to a rapid change in investor sentiment? recall that prior to the financial crisis, a number of important financial institutions, in their role as lead arrangers of syndicated loans, amassed significant “ pipelines ” of very large deals, which effectively represented commitments to provide financing. when investor interest waned, banks were left with notable positions in “ hung ” deals, which resulted in substantial mark - to - market losses. today, in contrast, banks report that they have significant risk mitigants in place to protect their balance sheets. in particular, deals are smaller, financings are reportedly arranged on a “ best efforts ” basis, and banks are said to maintain considerable contractual flexibility postcommitment to adjust the pricing and structure of loans, at the expense of borrowers, to market - clearing levels. 6 a second question is whether leveraged loans are being funded on any significant scale using mechanisms, such as repo funding, total return swaps and other otc derivatives, and collateralized loan obligations, or clos, that were prevalent before the crisis. during the market disruption in 2007 – 08, the significant leverage deployed through these channels, and the operation of the associated