Graph of Risks to the Inflation Projection (GRIP)
8th Situation Report 2012
The model simulation results captured in the GRIP represent a risk of easier monetary policy overall compared to the message of the forecast published in Inflation Report IV/2012, due to an accumulation of slight deviations from the forecast mostly in this direction. Domestic economic activity, wages and inflation were lower than forecasted. New information on developments abroad is also acting towards easier monetary policy. The exchange rate is the only variable dampening these risks, while the effect of domestic interest rates is neutral. With regard to inflation, the balance of risks in the GRIP is only very slightly anti-inflationary.
Outside the GRIP simulation there are uncertainties linked with domestic fiscal developments and with a deteriorating outlook for economic activity in the euro area. The currently higher agricultural commodity prices represent a slight risk of higher inflation and tighter monetary policy. According to the Monetary and Statistics Department, the overall balance of risks to the Inflation Report IV/2012 forecast is tilted slightly to easier monetary policy.
