Are policymakers pushing on a string?

The failure of policy loosening over the past six months to stimulate an economic rebound has led some to suggest that elevated real interest rates or oppressive debt burdens are hobbling corporate loan demand.  A more pertinent concern in our view is that the banking system is still not channelling credit to firms that can invest effectively. Nonetheless, with policymakers stepping up policy support in recent weeks, we suspect that economic conditions will be brightening soon.