It has helped to preserve the current accommodative financial conditions on which the sustained convergence of inflation to levels that are below, but close to, 2% over the medium term is based.
Our primary concern was the state of the credit markets and the economy, but we could also see that these broader issues were linked inextricably to the state of depository institutions’ balance sheets and profitability. A satisfactory recovery from the recession of that period, in our judgment, required the active participation of a viable banking system.