The benign effects of global competition and low-cost imports on consumer prices might lead to an underestimation of the stimulative effects of monetary policy which is consistent with the preservation of price stability over the medium term, but which can be characterised as accommodative as evidenced by buoyant credit and money growth over a prolonged period.
A strong and persistent expansion of monetary liquidity could fuel or even trigger an asset price boom. During the bust phase of the asset price cycle, the associated credit crunch might lead to an economic downturn and a negative deviation from the objective of consumer price stability, and possibly even to deflation, which would exacerbate the financial crisis.