Releasing the Reserve Bank's statement of intent for 2010 to 2013, Dr Bollard acknowledged there was a lively debate in this country about the role of monetary policy in managing financial misalignment.
"For our part, we are confident that medium-term price stability is the right objective for monetary policy," he said.
However, Myles Wealth Management principal Craig Myles is calling for Dr Bollard to halt further rises in the official cash rate, saying that the "fragile recovery" is being put at risk by rising interest rates.
"I agree with the medium-term goal of price stability but we are coming out of the most extreme financial occurrence since the Great Depression.
"The Reserve Bank is running the risk of going too soon, extinguishing the recovery and leaving us bouncing along the bottom."
Since the OCR was moved up to 2.75% last month, business confidence had sagged, lending remained constrained and capacity was down, Mr Myles said.
International financial markets had reacted badly to news out of the G20 conference and the bad economic data from the United States.
Of more concern were the indications from the Reserve Bank that the OCR would continue to move up by 0.25% every six weeks or so, he said.
"The Reserve Bank wants to react to the slightest hint of inflation rather than allowing the recovery to bed in. It's just too soon," Mr Myles said.
On the economy, Dr Bollard said New Zealand had emerged from its recession, benefiting from stronger growth in its major trading partners in China, Australia and emerging Asia.
But recovery remained sluggish in Britain and Europe, and sovereign debt concerns hovering over several European economies were disturbing financial markets, he said.
Although New Zealand had emerged from its recession, there were almost daily reminders that conditions remained fragile, especially in the global funding markets.
As indicated in its recent Monetary Policy Statement, the Reserve Bank expected to continue unwinding the degree of monetary policy stimulus.
"While we have unwound most of the emergency liquidity support provided to the financial system during the financial crisis, our facilities remain under review given the current volatility in global markets," Dr Bollard said.
As banking supervisors, the Reserve Bank was engaging in global discussions on changes to the international bank supervision regime which would help reduce the chances of future financial crises.
The statement of intent showed the Reserve Bank would continue to advance the implementation of the new non-bank deposit taker regime, alongside the gradual rationalisation of the finance company sector. It would also continue to develop and implement the new prudential regime for the insurance sector.
At the same time, the Reserve Bank was guarding against other potential crises with a key initiative being the creation of a business support centre in Auckland to improve its business continuity and disaster-recovery capability.
