A failure to take a holistic, system-wide view logically implies a danger of ignoring systemic risks that emanate from the interaction of the financial market players. Systemic risk is created endogenously rather than having exogenous origins beyond the remit of financial markets. It can arise, for example, in the form of herding behaviour.
Households’ poor tolerance of price rises is reflected in their continuous perception that their present income level has declined compared with one year earlier and also that their income level one year ahead will not increase much (Chart 6-2). 4.