Alternatively, domestic short-term rates may  11  12  need to rise sharply to moderate inflation pressures associated with growing supply and demand imbalances. The main risks to the current expansion lie with future developments in the global economy, and a deterioration in the imbalances in the domestic housing market.
i)  Global risks  On the downside, the main risks are:  •  the Euro-area economy remains subdued or deteriorates, with consumer and business confidence affected by developments relating to Brexit, migration and anti-globalisation sentiment;  •  the incoming US Administration follows through on pre-election rhetoric relating to trade barriers, and abandons or renegotiates existing trade agreements;  •  economic growth in China slows following a period of financial disruption linked to the very rapid build-up in corporate (mainly SOE) debt over the past 7 years, and a rising level of bad debts in the formal and shadow banking sectors.