In particular, excessive national budget deficits and high levels of government debt may create the potential for conflict, BIS Review 10/1998  -4-  which would result in political pressure to provide transfer payments or to conduct a soft monetary policy. That must not be allowed to occur, however.
The right-hand graph of Chart 6 shows some indicators that represent the underlying developments in consumer prices. These indicators have continued to show relatively weak developments. The important indicators that affect underlying price developments are the output gap and medium- to long-term inflation expectations.