At the same time, downside risks to global financial stability have increased and the risks in the US housing market have started to manifest themselves. The most important factor that has contributed to the reduction of risks is the moderation of oil prices from their peak levels in August 2006.
However, with the recent firming up of oil prices again, it is not clear at what level, if at all, oil prices would stabilize. There does not seem to be a fundamental improvement in the supply-demand balance in the oil market. The geopolitical risk has also not diminished.