First, the Federal Reserve and other central banks are going to great lengths to communicate policy intentions and strategies clearly. Given this, markets should not be greatly surprised by either the timing or the pace of normalization. In fact, it bears mentioning that, following the taper tantrum, when the Fed started to taper its purchases, there was little reaction from markets.
Credit growth has remained robust, largely on account of improving business conditions and moderating credit risks. The ratio of nonperforming loans to total loans has been reduced to below 5.0 percent reflecting overall improvements in asset quality. In addition, banks have remained well capitalized with capital well above the regulatory minimum.