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ECB: We are far from the stagnant inflation scenario

ECB experts estimate that the European economy will not experience a stagnant state of inflation similar to that of the 1970s, characterized by a sharp rise in prices amid a small increase in production or even a contraction.

In particular, according to analysts in an ECB report released today, although growth forecasts have fallen and price expectations have risen since the Russian invasion of Ukraine, economic activity is expected to continue to strengthen in 2023 and inflation will slow down below 2% in its second half.

“Experts’ current forecasts are far from a stagnant inflation scenario,” the report said, noting that uncertainty has increased, which opens up the range of estimated results.

ECB analysts also say that the differences between the current situation and the 1970s “make it less likely that stagnant inflation will develop in the current phase”.

In particular, compared to then the dependence on oil has been reduced, the workers are less organized in trade unions and the economy continues to strengthen after the resumption of the activity that had been stopped due to a pandemic.

Source: Capital

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