The implementation of macro-prudential policy requires the early identification of risks and their systemic impact, the definition of appropriate and correctly calibrated instruments to mitigate these risks and a governance capable of taking decisions whenever necessary, independently of lack of public support or of possible conflicts with other policies. There are challenges inherent to all these tasks and my remarks will dwell upon them.
But the broad contours of the present cycle have been, and will continue to be, driven by the evolution of corporate profits and capital investment. The retrenchment in capital spending over the past year was central to the sharp slowing we experienced in overall activity. The steep rise in high-tech spending that occurred in the early postY2K months was clearly not sustainable.