This is indeed what has happened over the past five years. In addition, the principle of balancing safety and soundness with the need for appropriate risk-taking is reflected in the extensive tailoring framework that the Board adopted over this time period, which carefully and deliberately matched regulation and supervision to the actual risks presented by different institutions.
It is also not easy to identify a simple relationship between high budget deficits and the level of interest rates, not least because economic agents’ expectations, including expectations about the future course of fiscal policy, play a crucial linking role.