But you know full well – as  does the private sector – that, when the time comes, you’ll want to do something else in that case. It’s one thing to promise in abstract to be “irresponsible”, in advance of some hypothetical inflationary shock. It’s quite another, in the teeth of a real one, actually to be irresponsible. By that time the promise is in the past, the inflation is happening now and it obviously feels more important to deal with what’s in front of you than to abide by a pledge you might have given some time – even some years – earlier. Knowing this, people will naturally be sceptical about the promise in the first place and the policy would lose its force[14]. You’d be back in the world of the red line in Chart 4 (subject to the effects of QE). In a paper in 2019[15] economists at the Bank formalised this idea by introducing a probability that the central bank reneges on earlier commitments. The probability was assumed to rise in line with the scale of the subsequent inflation (and therefore the temptation to abandon the promise). But it’s precisely from the possibility of these high-inflation states of the world that the prior commitment really gains its force. (This is the Catch-22 of time-inconsistent policies: the only promise worth making is one you’ll subsequently be tempted to break).
The share of banks reporting a further slight tightening of conditions for corporate lending has fallen considerably, from 40% at the time of the previous quarterly survey to 3% for this quarter. Households appear to be benefiting from a similar trend, as no banks have announced a tightening of their lending conditions for households,  2  BIS Review 167/2009  whereas in the previous quarter 50% of banks reported a further slight tightening of lending conditions for non-mortgage loans and 20% for mortgage loans to households. The survey also suggests that demand for loans has stabilised. The share of banks experiencing increased household demand for mortgages has fallen from 40% at the beginning of this year to 10%. The situation in Switzerland is thus very different to that observed in other economies. Not only is there no credit crunch, but we have also witnessed a substantial increase in the volume of mortgages. There are also signs of a relaxation in lending conditions for mortgage loans. We would like to sound a note of caution, both to banks and to firms and households, as regards the risks inherent in a relaxation of discipline in real estate financing. Inflation outlook Monetary policy influences the medium and long-term inflation outlook. By contrast, it has very little effect on short-term developments. The past two years have been a perfect illustration of this. Inflation peaked at 3.1% in July 2008, before plummeting to –1.2% in July this year.