We judge that the economy still has material room to grow. And we remain mindful that significant uncertainty continues to weigh on the outlook. Given all of this, we judged that the current stance of monetary policy is still appropriate and maintained the target for the overnight rate at 1/2 per cent.
However, due to the existing flaws in the financial system and distorted incentive structures, the rating agencies issued unrealistically high ratings to new issuances, thereby contributing to the build-up of systemic risks. The crisis shows that the systemic risks posed by the immensely complex financial system were masked by the benign macroeconomic outcomes characterized as the “great moderation”.