The year-on-year rate of change in the consumer price index (CPI) for all items less fresh food, or the core CPI, has been negative since spring 2020, when the impact of COVID-19 intensified (Chart 5).
An increase in lending and narrowing of spreads on bank loans is a necessary and desirable aspect of the return to better-functioning markets and intermediation to promote economic growth. But spreads eventually could become narrower than what would be consistent with underlying risk, and lending could grow more quickly than appropriate for price stability if very high levels of reserves remain in place.