This action, together with earlier reductions in our policy interest rate, meant that the Bank had injected considerable stimulus into the economy. By the spring of 2002, evidence had already started to build that demand was recovering more quickly than had been anticipated. So, even though demand pressures were not yet showing up in prices, we began to remove some of that monetary stimulus.
These episodes were apt to be costly for those directly affected and reminded investors that investments pose risks, and that prudence requires that these risks be understood and managed. Overall, however, because these episodes were well contained and of short duration, they may have left investors too complacent, and therefore contributed to postponing an overdue repricing of risk.