In terms of monetary policy, this is the sensitivity of inflation expectations to temporary or local factors which induces risks, rather than the fact that households’ inflation expectations exceed inflation measures. This is clear from the analysis of the reasons causing inflation deviation away from our October’s forecast. This deviation is quite notable — +0.7 percentage points. According to preliminary estimates, 0.2 percentage points of this deviation stem from a faster rise in sugar and sunflower 1/4  BIS central bankers' speeches  oil prices and 0.3 percentage points — from the growth of grain export prices and their passthrough to prices for both bakery products and a broader range of food products. The remaining 0.2 percentage points are interpreted as additional steady inflationary pressure. It may result from both a faster revival of demand in a number of industries already facing supply-side constraints and secondary effects brought about by increased inflation expectations. This is what may impact a steady level of inflationary pressure in the future as well. Therefore, today it is rather important how the situation will be unfolding in the future, including how inflation expectations will be changing and whether secondary effects may become more intense. This may result in a longer-lasting influence of one-off factors on prices. Moreover, we should take into account that a rise in inflation expectations may speed up the growth of the demand for consumer lending which has already been expanding materially amid the accommodative monetary policy.
But of course don’t expect a central banker to answer this question, one year in advance. I will just mention the Banque de France view on the rationale that should be behind the determination of the starting level of the euro area short-term rates. As you know, we currently observe interest rate differentials between the “core” and more “peripheral” currencies participating in the exchange rate mechanism. Although these spreads have been dramatically reduced in the past two years, due to the remarkable convergence of inflation rates throughout the European Union, some interest rate differentials still exist. They can be attributed partly to differing positions in the business cycle, and partly to differences in credibility. Cyclical differences within the potential euro area should not be overestimated. There is, all in all, a relatively high degree of synchronisation in the business cycle in continental Europe. The convergence criteria laid down in the Maastricht Treaty certainly played an important role in fostering this synchronisation. Moreover, in the future, differences in cyclical developments will gradually be reduced as policies, structures and behaviour will become more and more similar. Lastly, some persisting differences may well be tolerated as is currently the case between the various regions of the same country or, for instance, between the various member states of the USA. Credibility differences between “core” and “peripheral” currencies result from the different lengths of the track records in terms of stability-oriented policies.