Overall, the 22  credit-to-GDP gap, which serves as an indicator for credit market imbalances and the potential activation of macroprudential measures, continued to correct in 2021 following the rise recorded at the onset of the pandemic, but remains wide. Credit intensity and the debt service ratio, both of which are complementary indicators, stand at moderate levels. In the housing market, the volume of new residential mortgage lending rose significantly in 2021, standing at the highest levels since 2010. However, given the sizeable volume of repayments, the stock of this credit grew by just 1.2%. The stock of loans to construction and real estate development held on its downward trend, albeit at a progressively slower pace. The indicators of real estate market imbalances have remained at positive values since 2020, albeit very close to the equilibrium level. Meanwhile, there was no substantial change in credit standards for new residential mortgages in 2021,21 although the average interest rate spread for fixed-rate mortgages narrowed to its lowest level in recent years. Overall, close monitoring of this market is required, as it could be impacted in opposite directions by the war, given the real erosion of agents’ income by higher inflation and the possible tightening of financing conditions, but also because it is a safe haven in the face of financial asset price corrections in a context of real interest rates holding at negative values.
The symmetry refers to the commitment to fight both upside and downside deviations of inflation from target. At that time, this framework took shape in the form of forward guidance which makes the first interest rate rise subject to: (i) expected inflation standing at 2% over an 18-month horizon; (ii) it holding at 2% in the medium term; and (iii) the course of underlying inflation being compatible with inflation stabilising at 2% in the medium term. Net purchases under the APP are also linked to these conditions, with the guidance stating that interest rates will only rise some time after the net purchases come to an end. Given this strategy and in the current context, a gradual withdrawal of the extraordinary monetary stimulus is appropriate: inflation expectations over intermediate horizons and in the medium term stand at around 2%, underlying inflation is clearly above 2% and there are risks of upside deviations from the projections. Thus, net asset purchases under the PEPP were discontinued in March 2022 and we announced in April that net purchases under the APP would end in Q3. In my view, given that the inflation outlook fulfils the conditions in our forward guidance, purchases under the APP should conclude very soon, in early Q3, so that the first interest rate increase can take place shortly after in July and we can exit the current negative rates at the end of Q3.