hike. we can see it from retail sales figures. the rise in consumer activity does not exert pressure on prices. this, among other things, is an important reason of a moderate vat pass - through to prices. the fourth factor is external conditions. a number of changes which only started to emerge in december, intensified at the beginning of this year. the us fed and the european central bank eased their rhetoric as regards the monetary policy outlook. improvements were seen in markets ’ expectations regarding the negotiations of international trade restrictions. these factors supported emerging market currencies and reduced their risk premiums. we may say that external risks declined in this part. at the same time, geopolitical risks remain in place. oil prices in the first quarter were higher than projected in the baseline scenario. however, risks are high that oil production will exceed consumption this year. finally, overall monetary conditions have changed little if at all since the start of the year. deposit rates have edged higher, while loan rates have stabilised. ofz yields dipped on the back of improving conditions in global financial markets, as well as a result of reviewed expectations of market participants as to the future key rate path. these ofz yield movements, while working to constrain the potential of loan and deposit rate growth, are laying the groundwork for their subsequent decrease. with due account for the totality of factors i have mentioned, we have downgraded our inflation forecast for the end of this year to 4. 7 - 5. 2 %. at this point in time, it is with a certain degree of confidence that we can say : provided that the situation unfolds according to our baseline scenario, the preventive steps we have made so far to increase the key rate last year are most likely to be sufficient to ensure annual inflation returns to 4 % in the first half of 2020. i will now proceed to speak on the risks, as usual. despite the reduction in short - term risks, the overall balance of medium - term risks remains tilted towards proinflationary ones. as before, we should approach the assessment of external conditions with great caution. the risks related to geopolitical factors remain high. we continue to observe manifold sources of uncertainly in the global economic outlook. investor sentiment is subject to rapid change in this environment, which is set to impact on ofz yields and the exchange rate. certainly, elevated and unanchored inflation expectations, as i have said, also remain a material

this way supervisors and central banks could approximate the potential systemic impact of the scenario selected. banks would benefit as well from such an exercise through benchmarking and learning effects. cooperation between central banks and supervisors let me then turn to the last topic i would like to touch upon, namely the cooperation between central banks and supervisors. i will consider three areas where i see major scope for improvement, namely financial stability assessments, liquidity and crisis management. the periodic monitoring and assessment of financial stability conducted by central banks would benefit from an enhanced cooperation between central banks and supervisors. in that context, i recall that the fsf stressed in its april report the need to improve the interaction between central banks and supervisors in the early detection of risks to the financial system. this entails that the supervision of individual institutions should be enhanced with central banks ’ financial stability assessments, which in turn should benefit more from supervisory insights. i am fully supportive of this recommendation. in their financial stability assessments, central banks take a “ top down ” approach by focussing on the main macro - prudential risks. supervisors, by contrast, take typically a « bottom up » approach by looking at the risks of individual institutions. somewhere these two approaches have to meet and influence each other for the better. for central banks this may mean that they have to communicate their financial stability assessment in a way that is directly relevant for supervisors, while supervisors have to bring to the attention of central banks developments in individual institutions that are important for the financial system as a whole. this recommendation is clearly relevant not only at the national level but also at a crossborder level. concerning the eu in particular, this presupposes an effective interaction between the assessment of risks faced by the eu banking sector made by central banks and supervisors, as reflected in the analyses of the bsc and cebs respectively. an important aspect of the cooperation between central banks and supervisors in periodically assessing the financial stability conditions is central banks ’ access to supervisory information. in normal times, the assessment of risks for the financial system as a whole needs to rely on a large set of information sources, including those from banking supervisors. an immediate example is represented by the data on the solvency and profitability of the banking sector, as well as ad hoc information on specific exposures of the banking sector. while it is fair to say that there exists already extensive access by central banks to supervisory information there is certainly room for improvement in terms of timeliness, frequency and detail. take the example again