Such a regime would allow greater leeway for an autonomous monetary policy: a rise in domestic interest rates would normally be associated with a more appreciated exchange rate within the fluctuation band, and thus with greater scope for future depreciation; it would not, therefore, trigger capital inflows if the band is credible.
Several upward risks to the outlook for price stability continue to exist. Concerns again relate to oil price developments, in particular to the extent that second-round effects stemming from wage and price-setting behaviour materialise. It is therefore of the utmost importance to avoid inappropriate reactions, as observed in past episodes of strong oil price increases.