*  *  *  Chairman Frank, Ranking Member Bachus, and other members of the Committee, I am pleased to present the Federal Reserve's Monetary Policy Report to the Congress. In my testimony this morning I will briefly review the economic situation and outlook, beginning with developments in real activity and inflation, then turn to monetary policy.
It is aggravating debtors’ repayment difficulties: in the first quarter the new bad debt ratio for business loans was around 4.5 per cent, which was high in historical terms; other impaired loans are also increasing sharply. Heightened risk is weighing on banks’ credit supply policies, discouraging lending and driving up interest rates.