But the wage-sensitive components of core inflation remain strong and domestic inflation is rising. This configuration suggests that the external drivers of underlying inflation – namely rising energy costs and supply bottlenecks – are easing, but domestic factors – i.e. wage pressures – are becoming increasingly important. At the same time, our monetary policy is working to rein in inflation pressures.
We have already undertaken a sizeable policy adjustment, and this is now starting to be felt along the transmission chain. First, we are seeing our past rate increases being transmitted forcefully to financing conditions. Borrowing costs have increased steeply and growth in loans is slowing.