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FRANKFURT (Reuters) -The euro zone’s inflation spike is just not as transitory as earlier thought and worth progress this yr is prone to exceeding projections, European Central Financial institution Vice President Luis de Guindos stated on Thursday.
Inflation hit 5% final month, the very best on document for the 19-country forex bloc, however the ECB expects it again underneath its 2% goal in each 2023 and 2024, even with out coverage tightening, as one-off strain ease.
“Inflation is just not going to be as transitory as forecast just some months in the past,” de Guindos advised a UBS occasion. “The evaluation of danger for inflation is reasonably tilted to the upside over the subsequent 12 months.”
He added that power prices are prone to stay elevated whereas supply-side bottlenecks proceed to exert upward strain on costs.
Nonetheless, over the long term, dangers are nonetheless seen balanced, de Guindos stated, including that 2023 and 2024 inflation are each seen just under the ECB’s 2% goal.
Some policymakers are extra sceptical, nevertheless, and warned that inflation might keep above goal even additional out as wage coverage is prone to alter to larger worth progress, making the surge extra sturdy.
Though power costs elevated in latest weeks, de Guindos stated this didn’t essentially alter the inflation image.
“They don’t have an effect on a lot the projections we produced 3 weeks in the past,” he stated.
The Omicron variant of COVID-19 can be unlikely to considerably change the expansion outlook, for now, he stated, including that European economies have tailored to dwelling underneath the pandemic.
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