The tightening in domestic credit conditions aggravated the ongoing recession, eroded the quality of banks’ loan portfolios and further weakened banks’ capital positions, which in turn made the bailing-out of the banking system by the government even more likely and thus pushed up sovereign borrowing costs even higher.
The key risks to the projected inflation path are related primarily to the international environment, notably the diverging policies of the leading central banks – the Federal Reserve and the European Central Bank, as well as uncertainties associated with movements in oil prices.