It is important to note, in this regard, that international arbitrage does not require complete interest rate equalization, just the equalization of (risk-adjusted) rates of return, including anticipated moves in the exchange rate. Control of the short rate is possible because monetary policy shifts the expected rate of currency appreciation or depreciation.
*  *  *  I wish to thank my colleagues at the Reserve Bank whose research on the labour market I have drawn upon in preparing these remarks, and in particular Miles Parker and Evelyn Truong. References can be found in the footnotes. Introduction Thank you for inviting me to speak today.