The question is: how long can low levels of interest rates be maintained without creating distortions in the efficient allocation of funds by the financial sector, and possibly endangering price stability? This is at the heart of the exit strategy. Before turning to it, let me make a few remarks about the divergent behaviour within the financial sector, especially in banks.
The challenge for other policies As I just mentioned, it is no surprise to see a slowdown in credit flows at the same time as a pick-up in trading. To some extent this divergence is desirable because a sound financial system is the key to a sustainable recovery. Still, it might create undesirable volatility in financial markets.