Peter Kažimír: No surprises

Our decision to raise interest rates is a measured response to a highly uncertain environment in which inflation risks are clearly tilted to the upside.

We move with purpose, not haste.

September’s rate hike preserves our flexibility. We will base future decisions on the data available at each meeting.

The energy shock has already lasted longer than many expected. Yet its full consequences have not yet passed through to the economy.

The longer elevated energy costs persist, the greater the risk that they become embedded in longer-term expectations, wages and prices.

We need time to assess whether indirect effects are developing broadly in line with our projections.

Whether demand and labour market conditions have become strong enough to generate second-round effects.

The broader environment remains exceptionally uncertain. Geopolitical tensions, energy markets, and global demand continue to evolve in ways that are difficult to predict with confidence.

I am encouraged that the economy has proved more resilient than expected. Growth has weathered the fallout better than many anticipated, and households and firms have once again demonstrated their ability to adapt.

This resilience is welcome. But it, too, has its caveats and limits.

Some aspects of the stronger economy may contribute to upside inflation risks. The main source of risk to prices, however, continues to be energy.

My attention is now focussed less on oil and fuel prices, but increasingly on gas and electricity prices. Food inflation, so important for perceptions and expectations, is also expected to pick up. Its extent will also depend on how various weather events unfold.

We need time to see more clearly along all these dimensions.

Thankfully, markets understand very well how we respond to incoming information.

This creates valuable space for careful observation and judgement. It allows us to act when necessary.

We should not confuse an open mind about the next decision with hesitation.

Our job is clear: to bring inflation back to target.

In an environment of exceptional uncertainty, flexibility is a strength, not a weakness.

\We will take each decision when it is needed, and we will not waver when the evidence calls for action.

That is how we work.