But it is important to stress that, were trend inflation to rise as a result of too ambitious an approach to supporting short term growth, financial prices would actually be among those most vulnerable to adjustment as long term interest rates rose. Conclusion 2008 opens with the financial turmoil of the second half of last year fresh in our minds.
Those events, and the deeper issues that triggered them, have mainly affected some of the G7 economies and have cast a shadow over their growth outlook in the near term. Emerging market economies have been less affected; in fact, in parts of Asia the main policy challenge has been to deal with the threat of overheating.