Moral hazard is surely not much of a problem today, when banks are healthy and bank capital ratios are high. But back in the late 1980s when over 200 banks were failing each year, moral hazard was a serious concern. All right, you may say, I understand why we supervise and regulate banks.
On the positive side, growth of domestic demand could turn out to be stronger than projected because of the substantial amount of monetary stimulus still in place. On the negative side, there are the uncertainties associated with global corporate and financial market developments and their potential effects on confidence and world economic growth.