6  BIS Review 46/2008  In the short term, all international commentators agree on the fundamental importance of restoring confidence in the creditworthiness and financial health of banks. The prompt disclosure by relevant banks of their exposures and associated losses would seem to be crucial in this respect.
As we observed in our latest Monetary Policy Review, current account deficits are a reflection of higher domestic expenditure and are not in themselves inflationary. There is however a possible risk to the exchange rate if the deficits are perceived to be unsustainable, particularly if the deficits reflect higher consumption expenditure.