Savers become more risk averse – sometimes through abrupt retractions from market trading – if faced with increasing difficulties in evaluating the risk to which they are exposed. The recent market strains started to pose challenges to the macro-economy at large when investors sought clarity about the quality of specific assets supporting investment securities, and shed those whose risk they could not easily assess.
The danger of inflation is not dead simply because the current statistics are showing comparatively stable prices for most of the industrial countries. The fight against inflation will not have been won until inflation has disappeared once and for all from the range of attractive policy options. The struggle to create a stable environment remains the prime task of the central banks.