The crisis began as a US subprime mortgage market problem that US policymakers first considered a situation which could be “fixed” with a single stimulus package. The mortgage problem, as we now understand it, was triggered by search for higher yield and new markets and perpetrated by the opacity in financial markets that resulted from rapid financial innovation.
The ongoing increases in the prices of oil and commodities – including food – are already threatening to spill over to other price sub-components and increase pressure on the general price level in both developed and emerging countries. In these circumstances, central banks must not deviate from their commitment to price stability. 4.