Other factors were also at work, with more of the strong growth in domestic demand being met through overseas production – rather than domestic production – than was originally expected. An important factor here has been the composition of the growth in demand. As I mentioned a moment ago, growth in aggregate demand was pretty close to what was expected.
It is critical, for instance, to couple the internal separation between supervisory and monetary functions with an external dimension, reinforcing the outside perception of clear separation in terms of operations and accountability. These risks might be contained successfully with the appropriate institutional and organisational set-up. More caution is warranted amid the legal risks stemming from the draft regulation that is currently on the table.