My sense is that greater complexity would be unnecessary for community banks, where a simpler, less burdensome approach may be quite satisfactory for supervisory purposes for most banks. Nevertheless, all banks should take to heart the message the Federal Reserve and other supervisors are sending about the need for stronger practices for evaluating credit risk.
While it may seem counterintuitive to increase interest rates when growth is weakening, the Bank has been facing a policy dilemma in the face of this weaker growth being accompanied by rising inflation risks over this period, mainly in the form of rising food prices and currency depreciation.