A price-wage spiral would be an illusory remedy and one that monetary policy must oppose. If monetary policy is credible, even if it cannot insulate the economy from the fluctuations of commodity prices, it can cushion their effects on expectations and domestic prices. A prompt monetary adjustment reduces the risk of tardy but violent corrections.
2  BIS Review 100/2008  Italian banks’ income and capital Excluding capital gains and extraordinary income, the profits of the five largest Italian banking groups fell in the first three months of this year by about a third compared with the same period of 2007; the rate of return on equity fell on an annual basis by nearly five percentage points, to about 9 per cent.