The drawback to this suggestion is that once the problem has reached systemic proportions, the intermediation process has broken down so badly that good borrowers will be hurt as well as bad ones. The government has to step in and close down the insolvent lenders, and take the bad loans off the remaining banks so they can start with a relatively clean slate.
It is important to convey this message, because otherwise observers might think that we have decided to raise rates at every meeting, as has been done by another important central bank. At the same time, I said that we never embark on any precommitment – we will do what is necessary to counter the risks that we identify.