Tuesday, October 26, 2021

ECB’s De Guindos Flags Structural Drivers in Inflation Rise

Frankfurt: ECB vice-chairman Luis de Guindos said on Monday that the recent rise in euro area inflation is a structural driver for supply disruptions and the European Central Bank will have to watch for any signs of wage increases.

The ECB officially expects a price hike in the euro area, which peaked at 3.4 percent last month, to fall back below its 2 percent target next year, but many inside the bank fear inflation will prove sticky.

De Guindos reiterated the ECB’s projections but cautioned that some drivers of recent inflation growth, such as supply bottlenecks and higher energy costs, were having a “structural” effect and could affect workers’ perceptions and wage demands. Were.

“This rise in inflation is not only responding to base effects, but also a component that is going to have a greater structural impact,” de Guindos told a Spanish event.

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“It’s making an impact that we were expecting just a few months ago.”

He said the ECB’s monetary policy response would have to change if inflation became permanent as a result of these factors lasting longer than expected or because they were starting to impact wage negotiations.

“We haven’t seen wage increases in the labor market for some time,” de Guindos said.

“But we have to be careful and cautious as wage negotiations are just getting started and the inflation sentiment becomes more clear as time goes on.”

De Guendos said it would have “achieved its mission” if economic activity returned to normal and the pandemic overshadowed the ECB’s pandemic emergency procurement programme.

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This News Originally From – The Epoch Times

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