This could have immediate spillovers to other markets such as for foreign exchange and foreign investments, potentially putting at risk also the external sector stability of the economy. Therefore, the presence of this third player – the market – in the back and forth between a government and the central bank (more generally, regulatory institutions) is an important feedback mechanism.
On the downside, these risks relate in particular to the outlook for economic activity, while on the upside they relate to higher than expected commodity prices. Furthermore, increases in indirect taxation and administered prices may be stronger than currently expected owing to the need for fiscal consolidation in the coming years.