In terms of monetary policy, this is the sensitivity of inflation expectations to temporary or local factors which induces risks, rather than the fact that households’ inflation expectations exceed inflation measures. This is clear from the analysis of the reasons causing inflation deviation away from our October’s forecast. This deviation is quite notable — +0.7 percentage points. According to preliminary estimates, 0.2 percentage points of this deviation stem from a faster rise in sugar and sunflower 1/4  BIS central bankers' speeches  oil prices and 0.3 percentage points — from the growth of grain export prices and their passthrough to prices for both bakery products and a broader range of food products. The remaining 0.2 percentage points are interpreted as additional steady inflationary pressure. It may result from both a faster revival of demand in a number of industries already facing supply-side constraints and secondary effects brought about by increased inflation expectations. This is what may impact a steady level of inflationary pressure in the future as well. Therefore, today it is rather important how the situation will be unfolding in the future, including how inflation expectations will be changing and whether secondary effects may become more intense. This may result in a longer-lasting influence of one-off factors on prices. Moreover, we should take into account that a rise in inflation expectations may speed up the growth of the demand for consumer lending which has already been expanding materially amid the accommodative monetary policy.

Monetary conditions are the third factor we discussed when making our decision. Monetary conditions remain accommodative. Coupled with the Government’s support measures, this promotes lending across all segments, including the households, corporates, and small and medium-sized businesses. The annual growth of corporate lending reached its five-year high in October. The offering of corporate bonds has also been expanding. Mortgage lending continues to increase significantly. The portion of subsidised mortgage loans slightly contracted in October, but still equals nearly 30% of the disbursements. Concessional lending terms will remain in place until the end of 2021 H1. A number of programmes launched to support corporate lending have already been terminated. We are going to monitor how market interest rates and non-price lending conditions will be adjusting in this situation. The current economic situation is another essential factor influencing our decisions. The epidemiological situation has worsened today, which expectedly has a restraining effect, but this impact is currently considerably lower than in 2020 Q2. Although the situation is not uniform across industries, the decrease in economic activity is not as drastic as in spring and early summer when large-scale anti-pandemic restrictions were in place. Furthermore, companies and households have already adjusted to the changed environment to a certain extent, including additional requirements. Therefore, we may rather talk of a pause in recovery processes. We can observe that economic trends and financial flows are changing unevenly. They have returned to normal or even exceeded this level in a number of sectors, while other industries are far from a complete recovery.