In that regard, we see a slowing of the growth in aggregate demand as a necessary element in the mix. At this time, some of the key factors that have supported strong final demand by domestic purchasers remain favorable.
However, asset price rises following a reduction in policy rates may also raise bank capital through positive valuation effects on banks’ trading books. The second sub-channel of the credit channel is called the balance sheet channel and works through changes in the quality of the borrower.