Credit spreads at depository institutions and in the open market have remained extremely narrow by historical standards, suggesting a high degree of confidence among lenders regarding the prospects for credit repayment. The key questions facing financial markets and policy makers are: "What is behind the good performance of the economy?" and "Will it persist?"
Without question, the exceptional economic situation reflects some temporary factors that have been restraining inflation rates. In addition, however, important pieces of information, while just suggestive at this point, could be read as indicating basic improvements in the longer-term efficiency of our BIS Review 70/1997  -2-  economy.