Looking back, due partly to the rise of emerging economies and financial innovation, the global economy had been enjoying high growth without inflation until after the mid-2000s. That situation was also referred to as “Great Moderation”, and especially the U.S. and European economies became increasingly confident in their future.
However, circumstances were difficult, since certain factors, including substantial expenditures on defense, social policy, and support of the agricultural sector, caused strong growth of the money supply. The Bank’s task was made even more difficult in view of the country’s underdeveloped financial markets. Yet, the Bank was successful in conducting a tight monetary policy.