It’s too early to tell whether what we are seeing in global financial markets today can lead to disruptions that can prompt a change in either our growth scenario or our inflation scenario, or whether this is a shift in global demand that would have to take place anyway and that can be managed in a smooth way by the international community.
Take away the punch bowl just when the party gets going. We have learned the hard way that when the music is playing, bankers want to dance. One way to restrain the excesses of booms is to impose countercyclical prudential requirements to lessen the procyclical nature of the Basel 2 framework for credit risk.