An important aspect of the financial stability process has been the growing emphasis on the role of market discipline. As part of the process, the Reserve Bank has laid strong emphasis on the levels of transparency and standards of disclosure in banks’ balance sheets.
However, this benign environment is not expected to continue as the expectation is that the most recent reading was the low point in the current inflation cycle due to a combination of base effects and tax increases (including the VAT4 and fuel levy increases) is expected to confirm that the most recent reading was the low point of the current inflation cycle.