In addition, although fiscal policy has provided important support for the economic recovery, it will need to be put on a more sustainable path in the medium term. Failure to do so risks a market reaction that could increase longer-term interest rates; economic growth would be hindered if government borrowing boosts the cost of capital and diverts resources away from private investment.
On top of that, there is a risk that the rate of increase in prices will slow if (1) households do not become more tolerant to price rises amid the deeply entrenched behavior and mindset, mainly among firms, based on the assumption that prices will not increase easily, and (2) the pass-through of cost increases to selling prices is limited, despite improvement in the output gap and an increase in raw material costs.