Today, European Central Bank chief economist Philip Lane has made a statement that slightly worries the market. He said European zone inflation at 5% sounded "very strange" after a long period of slight price growth, but he was confident the rate would come down this year. Waima so the market is still trying to digest the statement.
Inflation for the block unexpectedly increased from 4.9% to 4.8% in December. This reading marks a new high for the european bloc and it has exceeded twice the axis of the set inflation target of 2%.
However, Lane reiterated that this factor is temporary and the period from 2020 to 2022 is part of a “pandemic cycle in inflation” and cannot be compared to historical norms.
Lane added that inflation this year will decline and will be slightly above target levels. The ECB had previously projected that inflation would exceed its target for 2022 as a whole before falling “slightly below” targets in 2023 and 2024.
He was puzzled by the latest reading, according to him before the inflation pandemic the ECB was at a low reading for a long period of time. So he expects this year inflation will decrease.
Lane told RTE that while high energy prices are a major concern, supply pressures should ease in the oil and gas market this year. He also does not see the need to change the interest rate policy on this factor.
While the ECB’s forecast sees inflation return to 1.9% by the fourth quarter, most influential policymakers question this narrative, there is a risk of inflation warnings towards higher numbers and the above target readings could continue into next year.
