The Greek default and ensuing sovereign debt crises in the GIIPS countries showed that banks having significant exposures to sovereign debt were the most susceptible to fluctuations in sovereign borrowing costs and faced attendant market plus funding consequences. Such sovereign debt-bank nexus creates a two-way feedback loop.
•  Total CPI inflation has fallen noticeably below the 2 per cent target, as expected. It is projected to return to target by the end of 2013, somewhat later than previously anticipated. •  The inflation outlook in Canada is subject to significant risks.