Transcript of the introductory statement from the press conference - 28 March 2013

GOVERNOR

As usual, this slide mainly covers what you already know, at least in its first bullet: we decided unanimously to leave the repo rate unchanged at 0.05%. The second comment also says what we say all the time, namely that interest rates will be kept at current levels, i.e. at zero, or technical zero, over a longer horizon until there is a significant increase in inflation pressures. And of course, if we need to ease further, we will ease through exchange rate policy, i.e. interventions.

As for the reasons for the decision, the situation has not changed much since we last met, which means that consistent with the forecast is a slight decline in market interest rates, followed by a rise in rates as from mid-2014. With rates at technical zero, a slight reduction in market interest rates is very difficult to pull off, hence the word about interventions. At the same time, it is good to say that neither the forecast nor the Inflation Report, which de facto expresses the forecast, predicts any increase in inflation pressures, and we have identified no tangible risks of an increase in such pressures. Maybe I should add that more economic indicators have shifted slightly, but most of those shifts balance out in the overall components, so in fact there is virtually no tangible qualitative change in the environment compared to the environment predicted in the forecast.

Now for the current inflation forecast. It is perhaps worth mentioning that inflation in Q1 is slightly below the forecast. Monetary-policy relevant inflation has even moved below the lower boundary of the tolerance band. As regards the individual influences, the effects of higher excise duty on cigarettes are absent so far. Food prices recorded slightly lower growth. Other parts of the deviations were caused mainly by changes in the consumer basket.

Turning to the external environment, first, it has recorded no significant change. However, if you look at all the movements, they are mostly in the anti-inflationary direction. However, they are by no means strong. The only movements that could – with considerable licence – be identified as going in the opposite direction are those in energy prices in 2013, but the changes are so marginal that they are not worth working with. Of course there is also currently the dollar-euro exchange rate. But again, well, a depreciation of five cents.

As for the developments, the economy declined more markedly than we had expected, or than the forecast had expected, to be absolutely precise. All the new January indicators continue to point to subdued economic activity. Looking at the rising employment, we find after converting from part-time to full-time equivalents that the figure is in fact not optimistic. The average nominal wage accelerated in Q4, but everything suggests that this was caused by tax optimisation. Cost-push pressures are apparent only for agricultural producer prices. Perhaps I should mention with regard to the GDP indicators, which I think were two slides earlier, that there is a slight rise in inventories, but even that – in the light of falling orders and falling industrial sentiment – is hard to interpret as pointing to a recovery. Rather, the other indicators suggest that, on the contrary, this is a sign that sales are not as good as corporations had expected.

Looking at the figures comparing the developments and the forecast, it is very visible that the only indicator deviating from the forecast in the inflationary direction is the average wage in Q4, which I have just commented upon. All the other figures tend to suggest very slight – I repeat – it is difficult to make anything tangible of it – very slight anti-inflationary pressures. As I said, the gist of this Situation Report is not that it is leading in one direction or another that is stronger or more tangible. Rather, the developments are as we expected in qualitative terms, even though some components are moving upwards and others downwards.

With regard to the risks to the forecast, of course, they can now be more easily identified in the direction of slightly easier monetary conditions. As I said, with the exception of inventories, domestic economic activity is really not looking very positive. Domestic inflation is below our expectations. The situation abroad is relatively dramatic, although it seems so far that the most dramatic events are limited in extent.