Global financial markets have been unstable due to continued disruptions stemming from the U.S. subprime mortgage problem. Although overly pessimistic views about global financial markets have subsided compared with some time ago, the deterioration in the functioning of the U.S. and European markets for securitized products has remained significant and strains in money markets have persisted.
Moreover, financial institutions have increasingly been tightening their lending standards. Against this background, the global economy – including the U.S. economy, which has been decelerating even more clearly – has continued to be exposed to downside risk. At the same time, the risk of inflation has been increasing globally, as prices of crude oil and other international commodities have been rising substantially.