And a new equilibrium will take shape only when financial institutions seize new opportunities and the changes in the rules of engagement and the relationship with the official sector are more clearly understood. Third, I will discuss actions of the official sector during this period of turmoil.
Most of these policy actions have been taken in vigorous pursuit of financial stability – that is, to reduce financial stresses, shore up credit intermediation, and thereby support economic activity. And that makes good sense. Some material lessening of financial instability is essential so that markets can function properly and the economy can avoid more substantial weakness.