It is not to say that the banking sector response was all that we wanted because there were still some elements and gaps in the market response that we felt were inadequate. While overall credit grew well and continues to do so, some sectors, particularly SMEs, did not receive the credits we wanted them to get. The credit did not extend or reach out to the sectors hit particularly hard by Covid-19. Our response is to design policy measures to supplement the market response, for example, what we initially called a soft loan program. The program then started to have some obstacles because of the pricing of the loan structure. Therefore, we came up with another emergency degree on Financial Rehabilitation Measures, which in part established a loan facility for SMEs with a credit guarantee component from the government. The measures were to encourage the banks to lend to those sectors which had not received adequate credit by addressing the high credit risk that banks might experience from lending to SMEs. As a result of the package that we put together on the SME front, we managed to see loan growth in SME sectors. These measures are examples of the proactive response that policy authorities, both on the fiscal side at the Ministry of Finance and us on the monetary side at the Bank of Thailand, try to get the economy through this crisis, as well as it could be reasonably expected.
2  BIS central bankers’ speeches  Important to follow the international debate One aspect which has been debated a great deal both in Sweden and internationally, and which I do not intend to highlight here, is the level of the inflation target. That issue has recently been discussed quite thoroughly by some of my colleagues, and I do not have much more to add.5 I would just like to say briefly that if we are going to discuss a change in the target level, then I, like my colleagues, have greater sympathy for the argument in the international debate that central banks should raise their inflation targets than for the argument in the Swedish debate that the inflation target should be lowered. The main reason for this is the motive usually stated as the main justification for a rise – that if the target is too low, or if inflation expectations are permanently too low for some other reason, then the policy rate will hit its lower limit more often and for longer periods.6 This means that monetary policy in the future would find it harder to counteract a recession. However, it is too early today to draw the conclusion that 2 per cent is too low a level for the inflation target, and the discussion needs to continue.7 Nor do I intend to say anything about the issue debated both in Sweden and internationally as to whether monetary policy should be used to actively attempt to counteract the accumulation of financial imbalances.