Moreover, those direct channels might be amplified if resolution mechanisms are complex, lengthy or surrounded by too much uncertainty. A central bank has an interest in avoiding the risk of such a destabilizing situation because of its mandate for price stability: since the transmission of its monetary policy relies in the first instance on the smooth functioning of the money markets.
With appropriate macroeconomic adjustment and regulation, the CPI in year 2004 is expected to be kept at around 3%. To be more specific, hangover effect may contribute 2.2 pp to CPI, new inflation factors and price adjustment policies contribute 1 pp. Combined with other non-quantifiable upward price pressure, the CPI growth rate could maintain at around 3% if macroeconomic adjustment measures gradually take effect.