Headline HICP inflation has risen by a percentage point over the same period, although mostly through the removal of energy price base effects. Credit standards have been loosening for firms and households, loan demand is increasing and banks are using the additional liquidity from the APP to grant more loans.8 There is, so far, little evidence of negative effects from our unconventional measures.
In fact, it is one of the key requirements in the proposed revisions to the Basel Accord. The test now will be to see if recent events will provide motivation or if the markets will require organizations to more aggressively and creatively educate the marketplace about their true underlying exposures.