-3valuation pressures.3 Briefly, leverage, across a range of institutions, is a key amplifier of solvency shocks, leading to a greater chance of a credit crunch or fire sale. Liquidity and maturity mismatches can generate run risk, leading to fire sales and contagion. Finally, elevated valuation pressures, especially when combined with high leverage, can lead to excessive credit growth.
In the second quarter of this year real GDP growth is estimated to have grown by 0.3% quarter on quarter, following upwardly revised growth of 0.4% in the first quarter. In contrast to the first quarter, developments in demand appear to have been more broadly based, as activity was supported by private consumption, export growth and inventories.