Concerns about global imbalances continue to prevail over longer horizons, as do risks relating to protectionism. With regard to price developments, according to Eurostat’s flash estimate, annual HICP inflation was 2.4% in April 2006, compared with 2.2% in March and 2.3% in February.
They would respond by curtailing their lending to those borrowers to whom lending involves the highest costs, in the form of high transaction costs for loan evaluation and monitoring, and/or because of higher credit risk premiums. The banks might also attempt to recover some of their losses by increasing the fees and charges levied on their customers.