Graph of Risks to the Inflation Projection (GRIP)
6th Situation Report 2011
The model simulation results captured in the GRIP represent a slightly anti-inflationary balance of risks to the forecast for both headline and monetary-policy relevant inflation published in Inflation Report III/2011 amid a significantly lower outlook for interest rates. The external environment has the biggest impact on the balance of risks, with a considerable decrease in the market outlooks for euro area interest rates relative to the forecast implying a much lower interest rate path in the Czech Republic. The other points on the GRIP lie close to the intersection point of the axes, as domestic economic developments are broadly in line with the forecast and the deviations from the forecast are so far small and in both directions – wages and the exchange rate upwards and inflation and GDP downwards.
There are other risks and uncertainties outside the GRIP simulation. The key uncertainty is the outlook for foreign interest rates and, generally, the further course of the euro area debt crisis. The risks to the short-term inflation outlook are very slightly on the downside, especially as regards administered prices. By contrast, the currently weaker-than-forecasted exchanged rate is an additional upside risk to the inflation outlook.
The Monetary and Statistics Department therefore assesses the overall balance of risks to the forecast for both headline and monetary-policy relevant inflation as being slightly anti-inflationary. The risks to the current forecast for interest rates are significantly on the downside.