Updated on Monday, 27 September 2021 – 15:59
It has justified this trend in the “strong increase” of oil, the end of the temporary reduction of VAT in Germany and the higher costs due to the shortage of materials and equipment.
The current upward trend in the price level is a “largely temporary” phenomenon and, although there are “some factors that could lead to stronger pressures” than expected, the European Central Bank (ECB) thinks that there are few “signs” that point to this “risk” materializing as stated this Monday the president of the institution, Christine Lagarde.
During his speech before the commission of Economic and Monetary Affairs of the European Parliament, the Frenchwoman recalled that inflation rose to 3% in August and it will be above this figure in autumn, but the issuing institute still thinks that it is a transitory phenomenon.
“We continue to see this rise (in prices) as something largely temporary,” the ECB president told MEPs to later justify this upward trend by the “strong increase” in the price of oil, the end of the reduction temporary VAT in Germany and the higher costs derived from the shortage of materials and equipment.
Lagarde went on to point out that “the impact of these factors should dissipate over the next year” in line with the institution’s latest forecasts, which point to a 2.2% inflation this year, 1.7% in 2022 and 1.5% in 2023.
In any case, the president of the ECB stressed that there are “some factors that could lead to pressures on prices stronger than currently expected.” Among them, he cited the possibility that the shortage of raw materials and other equipment is “more persistent” or that inflation “results in higher wage demands”.
“But we see limited signs of this risk for now, which means that our base case is still inflation that remains below our medium-term target,” that is, less than 2%.
On the other hand, Lagarde has assured that it is “evident” that the economic recovery of the eurozone is “increasingly advanced” and this is due in part to the “successful vaccination campaigns throughout Europe”, which have led to a relaxation of the restrictions adopted to deal with the pandemic.
This fact, he explained, has supported a “rebound” in economic activity, especially in the services sector, which has been “the worst hit” during the crisis. As a result, the eurozone economy expanded by 2.2% in the second quarter of the year, “more than anticipated” and the ECB expects “strong growth” in the second half.
This would mean that by the end of the year the level of GDP prior to the pandemic has been exceeded, a step that is reflected in the latest growth projections of the ECB, which point to a growth of 5% in 2021, which will then be reduced until the end of the year. 4.6% in 2022 and 2.1% in 2023.
However, the president of the ECB has remarked in the European Parliament that the economic perspectives “remain uncertain and depend strongly on the evolution of the pandemic”, although the risks are “balanced”.
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