Several factors have propelled reasonably strong economic growth. A critical element has been supportive financial conditions. Despite the tightening of monetary policy that began in mid-2004, short-term interest rates were at fairly low levels until recently, and the effects of those low rates have continued to spur household and business spending.
In addition, although longer-term yields have moved up notably in recent weeks, they too have been low by historical standards. Moreover, credit to businesses and households has remained readily available at narrow spreads in markets and on favorable terms and conditions at banks, reflecting, in part, robust earnings and strong balance sheets at businesses along with good performance on outstanding household and business loans.