Some might determine that preemptive tightening is appropriate on the grounds that monetary policy operates with long lags, and inflation will inevitably accelerate as the labor market continues to tighten because of the Phillips curve. However, in today’s economy, there are reasons to worry that the Phillips curve will not prove very reliable in boosting inflation as resource utilization tightens.
Note that this decline does not indicate a lower importance in fee-based income in the banking sector, since the overall level of non-interest income increased compared with revenues from interest margins. See also BIS (2000a), p 131.