After the current rise in inflation began to subside, inflation in the european zone is likely to enter a new regime above the lows recorded in the years before the Covid-19 crisis as informed by ECB policymakers and French central bank chief Francois Villeroy de Galhau on Friday.
After a day the European Central Bank issued a statement raising its overall inflation forecast, Villeroy once again stressed that inflation will increase for a while and then head towards the ECB’s 2% target in 2023 and 2024.
The ECB stated yesterday that they see that inflation will record at an average reading of 3.2% next year before declining to 1.8% in 2023 and 2024.
After the mass expansion, Villeroy noted it was relatively difficult for inflation rates to return to the lows before the Covid-19 outbreak. He added that for inflation to fall sharply, it needed a “pragmatic driver” of monetary policy that depended on the real economic situation.
The ECB on Thursday, said it would end the purchase of emergency bonds next March but would temporarily mark the duration of the asset purchase program (APP) to facilitate the transition.
Villeroy said the amount was a significant reduction in asset purchases, which have been overlooked by some market analysts where the average purchase will drop from 90 billion euros this year to 20 billion by October next year.
