We believe this is because the Bank’s expansion of QQE last October – undertaken as a preemptive response to the risk that falling crude oil prices could affect wage negotiations and price-setting by lowering inflation expectations – has been effective.
Banks will, therefore, need to read the public mood and keep any increases to a minimum to take into account the difficult circumstances that borrowers are facing. We recognise that pricing of credit risk by banks had proved a major challenge in the past; however, the introduction of credit information sharing in 2010 has minimized this challenge.