Easy monetary policy itself may have generated a search for yields that resulted in a dilution of standards in assessing credit risk. The desirability of using monetary policy tools, and judgements regarding the adequacy of such tools, to meet asset price movements is yet another relevant factor in this regard, in so far as most central banks did not address this issue.
As some withdrawal of monetary accommodation commenced in response to perceived or visible inflationary pressures, the sub-prime crisis revealed these vulnerabilities starkly as confidence plunged, markets froze and triggered off panic among investors and lenders regarding their inability to value complex risky assets and structured derivative products.