The domestic economy is expected to slow down during the rest of year, being conditioned by the weakening of the domestic and foreign demand. Given the consolidated fiscal behaviour and the slowed foreign demand, the performance of the private domestic demand will determine the economic activity growth. However, its two components, consumption and investments, have not shown any recovery signal so far. Expected developments at home and abroad result in a contained balance of inflationary pressures, determining a slow increase in consumer price in the future. The demand growth  BIS central bankers’ speeches  3  below the potential of the economy in the upcoming period will continue to exercise low inflationary pressures. At the same time, the pressures generated by supply-side factors appear contained. Based on the insofar developments of the determinant factors of inflation and the projections for their development in the future, with 90% probability, inflation will range within 1.0% – 3.3% band after 12 months. *** Based on the analyses of the information set out above, the Supervisory Council holds that pressures on consumer prices at home remain low over the monetary policy relevant horizon; they have been, however, on the downside over the recent months. On the demand side, below-potential economic growth will continue to generate low inflationary pressures, while shocks from the supply side are expected to be moderate. The expected developments in economy and inflation imply that the simulating nature of the monetary policy will be retained during the period ahead.
Massive amounts of capital, mostly in the form of external bank borrowings, flew into Emerging Asia during this period. In 1997, total amount of international bank lending to Asia amounted to $ Most of these external finance were denominated in US dollar and with rather short tenor. Of course we now understand this kind of external finance is very risky as it entails currency mismatch and maturity mismatch. But these risks were simply ignored or brushed aside while everybody was enjoying the Asian boom prior to 1997. Then the bubble burst and the crisis-hit Asian economies all learnt very important lessons in a bitter way by paying a heavy price. 4. Since the Asian Financial Crisis the Emerging Asia has implemented many structural reforms and has now re-emerged as stronger and more resilient economies. 5. As a result, Asia, once again, has gained centre stage and, until the last year or so, become the preferred destination of international capital flows. Unlike the 1990s, the structure of finance in Asia has changed because external bank borrowings, although still quite significant, have been overtaken by bond borrowings. Around 80% of bond issuance in the last three years in major Emerging Asian economies was denominated in domestic currency, thereby reducing currency mismatch risk for the borrowers. Moreover, the average tenor of the newly issued bonds has steadily been lengthened to 6.3 years in 2013, which would mitigate the risk of maturity mismatch and short term roll-over risk. 6.