In particular, rapid credit growth should prompt the central bank to look extra hard for inflation risks. Such a policy, undertaken when the inflation threat seems remote, would no doubt be characterised as excessively cautious.
This is one of the reasons why the G-sec yield curve may be viewed as a public good, as I have been emphasizing. Third, G-secs provide the most widely used high quality collateral for payment and settlement systems, liquidity operations and other financial sector transactions.