It is important to be attentive to the emergence of any imbalances, because we do not have much experience with pro-cyclical fiscal stimulus at a time when resource constraints are tightening and growth is above trend.
Despite elevated asset valuations, overall risks to the financial system remain moderate in no small part because important financial reforms have encouraged large banking institutions to build strong capital and liquidity buffers. History suggests, however, that a booming economy can lead to a relaxation in lending standards and an attendant increase in risky debt levels.