Peter Kažimír: Confidence without complacency

We’ve started this year in an orderly, even slightly boring fashion.

There were no surprises or developments that would have derailed us from staying put and keeping the rates where they were since June last year.

Incoming data confirmed that the confidence and cautious optimism embedded in the December forecast’s outlook were justified.

The overall situation, however, remains fragile.

It is only early February, but we have already witnessed turbulence, ups and downs.

Uncertainty remains high, and I expect volatility to persist in the months to come.

We need to monitor how this environment and sentiment unfold and how they affect the economy and inflation.

We have to remain confident but must not become complacent.

When I look at inflation, the overall situation remains balanced. We’re close to the target, but this currently hinges on favourable energy price dynamics.

Should the eurozone’s economy deliver a stronger-than-expected performance, upside inflation risks could come into play, but let’s see.

On the other – the downside inflation risks – side, there’s the element of the exchange rate.

The euro exchange rate has been, and remains, in the spotlight.

We do not target the exchange rate, it’s a bone-hard fact.

(That being said) Any further appreciation will have to be evaluated against the relative strength of the euro area’s economic performance and ultimately our medium-term inflation target.

Looking forward, it would take a major departure from our baseline scenario for me to consider recalibrating the policy setting.

For now, the baseline holds.