The reality is that when the shortfall in desired spending is large or arises quite quickly, as was the case last year when businesses slashed their investment plans in light of a perceived overhang of capital, the initial monetary policy offset can be only partial and not necessarily synchronous.
At this stage, the prime overdraft rate of banking institutions at 20 per cent is about 10 per cent above the current rate of inflation. The rates of increase in both bank credit extension and in the money supply are also beginning to show signs of a slow-down.