Business confidence is at very low levels but seems to be bottoming out.
Falling GDP will produce a large output gap, so underlying inflation will decline even as growth recovers. Orthodox monetary policy has been eased about as much as is practical, but further measures to reduce market interest rates could be considered. Both automatic and discretionary fiscal responses will support demand and further measures may help cap the rise in unemployment.
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©OECD Observer No 274, July 2009