The European Central Bank still sees the recent rise in European zone inflation above the 2% target is a temporary one and expects price pressures to ease next year as delivered by ECB President Christine Lagarde on Thursday.
He acknowledged the decline would take longer than the ECB initially expected but favorable funding conditions created by loose monetary policy were still crucial for the European zone economy to recover from the spread of the Covid-19 pandemic.
According to Lagarde, the ECB sees inflation continuing to rise in the near term but is expected to decline next year. He added that the main drivers of inflation were rising energy prices and barriers in the supply chain.
Eurozone inflation hit 3.4% last month and is seen rising to 3.7% in October in a flash estimate to be released on Friday.
This has raised the question of whether the ECB’s aggressive policies, massive bond purchases and negative rates on deposits are still appropriate or not. Lagarde informed that the ECB has conducted a more in -depth study, therefore the ECB is confident that this increase in inflation is only temporary and will subside in 2022.
The ECB last September saw that inflation would grow at 2.2% this year, 1.7% next year and 1.6% in 2023.
The Euro showed a strengthening against the US dollar with a strengthening of 0.60% to the trading level of 1.1673
