Additional policy measures -- beyond monetary policies -- are vital to make a durable exit from the global financial crisis and to safeguard financial stability. Crisis legacies need to be addressed. The traction of monetary policies must be increased with complementary reforms and financial excesses need to be contained.
If the Republican Party takes full control of the U.S. Congress in the midterm election, policy gridlock is likely to worsen, risking a rerun of the damaging fiscal battles that led last year to a government shutdown and almost to a technical debt default. More broadly, the gridlock will prevent the passage of important structural reforms that the U.S. needs to boost growth.