Photo credit: Aron Urb (EU2017EE) (CC BY 2.0

European Central Bank VP: Inflation “not as temporary” as thought

The vice-president of the European Central Bank has said that the record levels of inflation that the Euro is currently experiencing are “not as temporary” as previously believed.

Luis de Guindos, who was previously Spain’s economy Minister, has said that the inflation Europe’s currency is feeling may last longer than the ECB had expected.

The remarks were made this week during an interview with Spanish radio station COPE.

“Our inflation is more persistent and not as temporary as we expected,” the VP said.

“It has to do with delay factors in the logistics sector, bottlenecks in the supply of intermediate goods.”

It is likely that the VP was referring to supply chain issues seen across the global economy, primarily caused by various governments’ Covid lockdowns.

The announcement comes at a time when the Eurozone is facing the highest level of inflation since the currency was created. Inflation was at nearly 5% across the EU just last month.

De Guindos went on to warn of the economic aftermath of the pandemic and various lockdowns, asserting that countries were in very “vulnerable situations” going forward.

“I believe that we must bear in mind that sooner or later, the pandemic will be overcome and the countries in a more vulnerable situation in fiscal policy, with more deficits and public debt, will have to carry out an adjustment program,” he said.

“It will have to be done sooner or later.”

At the start of December, ECB President Christine Lagarde told the Financial Times that the issue of inflation was a short term “hump,” and not a long term trend.

“I see an inflation profile that looks like a hump,” she said.

“And a hump eventually declines.” She added that the ECB would likely not raise interest rates next year to combat the phenomenon.

This month, the US Federal Reserve also did a u-turn on the issue of inflation as regards the US dollar. After previously saying the trend was “transitory,” they now concede it will likely be a more long-term issue.




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