Coupled with this, the divergence of monetary policies of the leading central banks still remains the key factor of uncertainty in the international financial market given that the ECB decided to extend the quantitative easing programme at least until late 2017, while the Fed continued with monetary policy normalisation.
In my view, as long as inflation expectations remain well anchored, then any higher inflation would be transitory – as proved to be the case last year – and the appropriate balance in fulfilling our dual mandate would likely imply little change in the path of short-term nominal rates, in part because such a policy response would cause real interest rates to be somewhat lower for a time and thereby provide additional policy accommodation.