This lowers the inflation risk premium, and thus reduces the nominal fixed interest rate for everyone, from the government to the riskiest borrower. In this regard, I am confident that Dr. Urjit Patel, who has worked closely with me on monetary policy for the last three years, will ably guide the Monetary Policy Committee going forward in achieving our inflation objectives.
To a large extent, the achievement of a stable interest rate and credit environment depends on the size of Government borrowing (the Public Sector Borrowing Requirements or PSBR) and how it is financed. The sources for financing Government borrowing within the domestic economy are the public and the banking system (whether or not including the Central Bank).