While inflation in the eurozone is projected to reach 3%, the European Central Bank sees no reason to raise interest rates yet. They say we need to wait for the global economic balance to be restored.
Prices in the euro area have been rising for several months in a row at a rate above 2% year-on-year. This means that inflation is above the Target of the European Central Bank, whose monetary policy has been extremely loose for years.
But even inflation close to 3%, according to the ECB, is no reason to tighten this policy. “The inflation outlook is characterised by a jump in 2021, followed by a moderation in price growth in 2022 and 2023,” the ECB said. The current exceptionally high inflation is mainly due to the increase in the cost of production inputs and commodities caused by production cuts due to anti-emission measures.
According to the European Central Bank, we must now wait for the balance of the global economy to recover and not act hastily. They say the ECB does not want to repeat the rate hikes in 2011 that caused the debt crisis in some eurozone countries. Thus, “hawkish” policy is likely to prevail at the ECB in two years at the earliest.
