Recent spike in eurozone inflation is temporary, ECB says

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Director of European central bank (ECB), Isabel Schnabel reinforced the argument that the recent rise in inflation in the euro zone is a temporary phenomenon. “Many of the factors that caused the increase in inflation this year will probably disappear in 2022”, he projected, in a speech during a virtual event on Saturday.

The German economist, however, assesses that the recovery from the crisis caused by the coronavirus represents an opportunity for the European bloc to “escape” from the environment of low inflation and economic growth that dominated the scenario in the last decade. “For this to happen, continued fiscal and monetary support is needed in order to stimulate the nascent recovery,” he said.

Schnabel attributed the rise in prices in recent months to several variables, including the appreciation of commodities and bottlenecks in the production chain. According to her, the effectiveness of monetary policy in responding to these movements is limited, since they are considered supply shocks, not demand.