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There are many indicators that economy will slow down, says ECB chief economist

European Central Bank (ECB) Chief Economist Philip Lane said on Tuesday that there are many indications that the economy will slow down in the euro zone, due to the war in Ukraine and high energy prices.

“We are now making considerable interest rate hikes. This should make it clear to companies and workers that demand conditions will become less favorable,” he said, in an interview with the newspaper. Der Standard.

The central banker commented on the impact of the energy crisis on the economy.

“This year, we will spend around 5% of eurozone income on net energy imports. Previously, this number was around 1%. We will have to bear this burden collectively. Living standards will drop as a result of energy bills. It makes people poorer and it will look like a recession to many,” he said.

“But we expect inflation to decrease significantly in 2023, with further declines in 2024. And there will be some wage recovery over time, so that living standards start to improve again”, he pondered.

He explains that, before the pandemic, the low price of oil and the contribution of the supply of China and other emerging market economies to the reduction of prices, mainly of manufactured, ensured that inflation remained low.

“These forces are unlikely to return, which will likely increase inflationary pressure relative to the pre-pandemic period of extremely low inflation. We can, however, respond to this environment by adjusting our monetary policy. Greater inflationary pressure does not necessarily mean that we will have high inflation, because we can act against it,” she explained.

Source: CNN Brasil

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