As labor market conditions have tightened due to substantial excess demand, not only the inflation rate but also the wage growth rate has risen significantly. Under these circumstances, increases in services prices, which tend to reflect wage growth, have pushed up overall inflation (Chart 12).
As long as banks perform on all three parameters, the credibility and soundness of their balance sheets and business models will ensure their access to necessary capital and funding. And with the resolution regime in place, we no longer need governments to save banks with taxpayers’ money.