Short-term interest rates Per cent  8  8 US  6  6 Euro area  4 2  4 2  0 1999  2000  2001  2002  2003  0 2004  Source: Norges Bank  The international upturn came to a halt in 2000. The bubbles in the equity markets burst. Many years of high investment and rising unemployment led to excess capacity. The terrorist attacks on 11 September 2001 put a new damper on economic activity. From the summer of 2002 to the spring of 2003, a highly extraordinary accumulation of negative events in the global community - accounting scandals, fear of terror, war and disease - put a brake on growth. US interest rates, which were sharply reduced at the beginning of the downturn, have subsequently been reduced further. Interest rates have also remained low in the euro area. There are now clear signs that the global economy has passed the trough. However, while the outlook is brighter, price inflation is still low and interest rates are being kept unusually low. Economic growth is high again in the US. Employment is rising, but there is still excess production capacity and very low  10  BIS Review 11/2004  inflation. It may take some time before interest rates are increased substantially in the US. Growth in Asia is solid, but a global rise in interest rates is unlikely to start there.
The expansion of money has been sustained by the increased demand of the public sector for funds at end-2011, as well as the stable contribution of the demand by the private sector. The latter continues to reflect developments in the real economy, being conditioned mainly by weak demand for loans by businesses and households. In December, the loan portfolio of the banking system to the private sector was 10.4% higher than a year earlier. Similar to the most part of 2011, it has reflected the demand of the private sector to fund its liquidity, consumption and investment needs, materialising also the hesitation of the private sector to commit to long-term projects. In addition to demand factors, the supply of loans is assessed to have been more tightened in the second half of 2011, reflecting the added prudence of the banking system in lending. Latest developments in financial markets are influenced by the normal and quiet performance of demand and supply, which is in line with the monetary policy signals. The key interest rate cut to 4.50% is reflected in eased borrowing costs for banks, while it is expected to be completely transmitted to other higher-maturity market segments. Overall, risk, liquidity and inflation premiums in financial markets remain contained. Projections for the expected performance of the economy support the assessment for positive, though below potential, growth of the Albanian economy for the year ahead. Foreign demand is expected to continue to provide positive, but more moderate, contribution to aggregate demand increase.