The rise in inflation in the Eurozone is not as temporary as previously thought and the rise in prices this year is in danger of exceeding forecasts, European Central Bank Vice President Luis de Guidos said on Thursday.
Inflation hit 5% last month, the highest for the 19-nation monetary bloc, but the ECB expects it to return below the 2% target in both 2023 and 2024, even without tightening policy. as a one-time pressure drop.
“Inflation is not going to be as transient as it was just a few months ago,” de Guidos told a UBS event. “Inflation risk assessment has been moderately upward over the next 12 months.”
He added that energy costs are likely to remain high, while supply-side bottlenecks continue to push up prices.
However, in the long run, the risks are still considered balanced, de Guindos said, adding that 2023 and 2024 inflation appear just below the ECB’s 2% target.
However, some policymakers are more cautious and have warned that inflation could stay above target even further, as wage policy is likely to adjust to higher price increases, making the tide more resilient.
Although energy prices have risen in recent weeks, de Guidos said that did not change the picture of inflation.
“They do not greatly affect the projections we created 3 weeks ago,” he said.
Source From: Capital