An economy’s potential output growth, meanwhile, reflects the evolution of aggregate supply over a longer horizon (Chart 1).i Aggregate demand growth tends to move with short-term factors—such as shocks to foreign demand and exports—which may trigger cyclical movements in, for example, inventories and consumer purchases of durable goods. Aggregate supply growth is affected more by the slow-moving forces that I noted earlier.
For financial institutions, in particular banks and insurance companies, consumer issues arise all the time irrespective of whether we are in a crisis mode or in good times. We, at the Reserve Bank keep the consumer issues at the forefront when formulating policies.