Our ongoing intervention concerning the adequacy of provisioning for non-performing loans aims to ensure a satisfactory level of risk coverage; it will enable the banks to preserve investor confidence and attract low-cost external financing. It is essential in order to guarantee a satisfactory flow of credit to households and firms.
These factors will also contribute further to underlying inflation and will help headline inflation to settle durably at our two per cent target. Risk assessment We continue to see the risks to the economic outlook as broadly balanced over the medium term. The economy could perform more strongly than expected if households become more confident and save less than expected.