Monetary policy has been eased, in recognition of the changing circumstances, and should prove to have some expansionary influence over the period ahead. Domestically, the major risk we face is that public confidence over-reacts to the fact that we are not going to be doing as well as we did a year ago, or, somewhat perversely, to the lower exchange rate itself.
But, in order to put these things into perspective, we should remember that the large list of positive factors I gave above still applies — we still have strong export growth, sound balance sheets in the corporate and financial sectors, asset markets which are not overheated, no over-capacity in physical investment, low inflation and macro-economic policies that are exerting an expansionary influence on the economy.