Looking ahead, the inflation rate is expected to remain significantly above 2% in the near future, and it is likely to moderate only gradually in the course of 2008. Hence the period of temporarily high inflation rates would be somewhat more protracted than previously expected.
On the other hand, the improvement in economic activities has not stimulated corporate demand for external funds, since firms’ cash flow is at a high level in parallel with recovery in profits. Moreover, firms continue to reduce their debts as part of their balance-sheet restructuring measures. As a result, credit demand in the private sector has continued to be basically stagnant.