Against this background, the continued strength of monetary dynamics represents an important signal of the risks to price stability over the medium term that we have been addressing through our actions since end-2005, including today’s move. More specifically, annual M3 growth has remained very vigorous in recent months, supported by the continued strong growth of MFI loans to the private sector.
Although annual M3 growth of still above 10% overstates the underlying pace of monetary expansion, owing to the impact of the flat yield curve and other temporary factors, nonetheless, even after taking such effects into account, a broad-based assessment of the latest data confirms that the underlying rate of money and credit growth remains strong.