Otherwise, with the same interest rate, an increase in the rate of growth in economic activity implies an easing of monetary conditions. This creates distortions in the allocation of resources, tends to inflate financial asset prices and create imbalances which are very difficult to put right once inflationary pressures emerge.
2  The Bank’s view of recent economic and financial developments, determined by the Policy Board at the Monetary Policy Meeting held on December 18 and 19 as the basis for monetary policy decisions. BIS Review 102/2001  1  possibility that weak demand will further intensify downward pressure on prices warrants careful monitoring.