Increasing the utility of GHO is critical for adoption and peg stability, while on the other hand, peg stability is crucial to achieving confidence that will drive more usage. At the same time, seeing the recent drop in liquidity in balancer pools over the past couple of days, we are not sure if the suggested borrow rate increase will have a substantial effect. As @MarcZeller has noted, both current and suggested borrow rates are below market average rates. While it is hard to establish that the borrowing rate increase will have a strong impact on the GHO peg, we do not see this introducing additional risk.
Decrease in Balancer pool liquidity - TokenLogic Dashboard
Alternative Solutions
As mentioned by other community members on this thread, the GSM could introduce a vital peg stability aid in the long term, but to increase confidence and adoption in the immediate term, other measures need to be taken. Increasing GHO utility, such as enabling onboarding wGHO as collateral, can support the re-peg of GHO. We are aware of the concerns raised by Gauntlet here, but given risk controls on V3, primarily listing wGHO in isolation mode with a community-approved debt ceiling, this risk could be managed continuously, considering the evolving liquidity and market circumstances.