. the board is attempting to bring inflation down while preserving as many of the recent gains in the labour market as possible – what my predecessor called'the narrow path '. so far, we are observing that labour market conditions are easing, although they remain tighter than we think is consistent with low and stable inflation. our forecasts are for employment to continue to grow but more slowly than over the past few years. but these outcomes are dependent upon inflation returning to target in a reasonable timeframe and inflation expectations not drifting up. if that were to occur, it will be much more costly in terms of employment to get inflation down. in summary, while there are some encouraging signs, australia's inflation challenge is not over. an inflation rate with a'4'in front of it is not good enough and still some way from the midpoint of our target. given this, the board held the cash rate target at 4. 35 per cent at its meeting earlier this week. it noted that the path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks. at this stage, the board hasn't ruled out a further increase in interest rates but neither has it ruled it in. however, given the substantial costs to the economy and the australian people of continued high inflation, the board is committed to bringing inflation back to target in a reasonable timeframe. before i finish, i briefly want to address three further issues. we spend most of our time in these hearings talking about monetary policy and i understand why given the visible impact it has on the australian people and the economy. but we have many other responsibilities at the rba, including oversight and regulation of the payments system and the issuance of australian banknotes. payments system first, to the payments system. as you are probably aware, the reserve bank has had the power to regulate the payments system since 1998. it does so to promote competition, efficiency and safety in the australian payments system. but in recent years, the payments system has changed dramatically. it has moved from a system that was predominantly serviced by large established financial institutions and card schemes to a vibrant and innovative ecosystem, with participants ranging from traditional financial institutions to small start - ups to large tech companies. given this, the legislation that gave the rba the powers to regulate in this area was no longer fit for purpose. the government is addressing this issue by modernising the legislation to allow the rba

at risk if it were forced to liquidate its assets in a panic, and the best defence against that was to give them access to a central source of liquidity 3. central banks evolved, or were established by governments, to meet that need. historically this role had important synergies with other central banking functions, and with other aspects of what we now call financial stability policy. under the gold standard, the lender of last resort ( and the related liquidity management ) functions were closely intertwined buiter ( 2012 ), the role of central banks in financial stability : how has it changed? cepr discussion paper series no. 8780. goodhart ( 1988 ), the evolution of central banks, mit press. for a more recent discussion, see goodhart ( 2010 ), the changing role of central banks, bis working paper 326, http : / www. bis. org / publ / work326. pdf by this i mean a last line of defence. i don't mean to imply that banks should not hold liquid resources of their own in the first instance. bis central bankers ’ speeches with the price stability objective. the gold standard was seen as a general discipline against inflation or deflation. central banking actions to preserve the gold standard were therefore seen as both promoting price stability and also promoting the capacity of banks to meet their obligations – in other words, financial stability. part of that general role involved managing monetary systems in a way that would reduce the risk of panic and instability in the first place. but it also meant applying bagehot's famous principle that central banks should lend freely, at a penalty rate and on good collateral, in the event that a crisis occurred. the liquidity management role of central banks also led naturally to their engagement in other areas of financial stability policy, including exercising a degree of oversight of the banks that they were lending to. obviously the world now is very different from what it was in bagehot's day. we no longer have a gold standard, and financial systems are much more complex than they were then. but i began with that background in order to emphasise an important point of historical continuity. central banks retain a key role as liquidity providers and managers today, and these functions continue to have important synergies with other aspects of financial stability policy. how then should we think about financial stability policy in the modern environment, and how should we think about the central bank's role in particular? i want