Developments in advanced economy financial systems have been broadly favourable over the past six months, while conditions in some emerging market systems deteriorated somewhat. Conditions in most major banking systems have continued to improve in line with better economic outcomes. In the United States, the improving economic outlook has seen the Federal Reserve take initial steps towards normalisation of monetary policy. This is a positive development for financial stability, not least because a sustained period of highly stimulatory monetary policy can create incentives for excessive risk-taking by investors. ... (full story)