Developments thereafter will be key to the outlook for prices. Based on the economic outlook I outlined earlier, as economic slack dissipates the pace of decline in the CPI will tend to gradually moderate. However, if the pace of recovery in the economy is gradual, we should expect that downward pressure on prices would remain for a considerable period.
Two critical gaps highlighted by the crisis were the inadequate prudential regulation of the most systemically important financial institutions (SIFIs) and the sometimes nonexistent prudential regulation of the many activities now denominated as “shadow banking." The SIFI issue has received the most public attention, often in the context of too-big-to-fail concerns.