{"id":24718,"date":"2022-01-07T12:43:00","date_gmt":"2022-01-07T17:43:00","guid":{"rendered":"http:\/\/irishexaminerusa.com\/wp\/?p=24718"},"modified":"2022-01-08T09:46:21","modified_gmt":"2022-01-08T14:46:21","slug":"ecbs-chief-economist-predicts-inflation-in-europe-to-fall-this-year","status":"publish","type":"post","link":"https:\/\/irishexaminerusa.com\/wp\/?p=24718","title":{"rendered":"ECB’s Chief Economist Predicts Inflation In Europe To Fall This Year"},"content":{"rendered":"\n
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Philip Lane said current high levels of inflation, which hit a record 5 per cent across the Eurozone in December, are part of a \u2018pandemic cycle of inflation\u2019 (PA Images)<\/em><\/figcaption><\/figure>\n\n\n\n

Inflation is set to come down this year with current high rates part of a \u201cpandemic cycle of inflation\u201d, the European Central Bank\u2019s chief economist has said.<\/p>\n\n\n\n

Data from Eurostat shows inflation across the Eurozone rose to 5 per cent in December, a new high for the 19 countries using the single currency.<\/p>\n\n\n\n

In Ireland, the rate hit 5.7 per cent last month, with energy costs in particular hitting consumers in their pockets.<\/p>\n\n\n\n

The ECB\u2019s Philip Lane said that while surging energy prices are \u201ca major concern\u201d, they anticipate inflation rates will come down this year, and continue to decrease in 2023 and 2024.<\/p>\n\n\n\n

\u201cIn this year inflation is going to come down. It\u2019s going to be above where we want it to be in the long term,\u201d he told RT\u00c9.<\/p>\n\n\n\n

\u201cBut this three-year period \u2013 2020, 2021, 2022\u00a0 \u2013 is basically part of a pandemic cycle, if you like, of inflation.<\/p>\n\n\n\n

\u201cSo in that sense, it should not be, I think, interpreted in terms of compared to historical norms. The pandemic is a unique episode.<\/p>\n\n\n\n

\u201cOnly a few weeks ago in our December meeting, we looked at the prognosis for this year, for 2023, 2024.<\/p>\n\n\n\n

\u201cOur analysis is that inflation this year will be coming down in 2022.<\/p>\n\n\n\n

\u201cAnd, in fact, we project inflation to be a little bit below our target in 23\/24.<\/p>\n\n\n\n

\u201cSo, yes, we hear numbers like 5 per cent in December 2021. That sounds so strange after a long period of low inflation.<\/p>\n\n\n\n

\u201cBut again, to repeat, we do think this year the inflation pressures will be easing over the course of this year and in fact, we think inflation in 23, 24 will be a little bit below where we would like it to be in terms of our targets.\u201d<\/p>\n\n\n\n

Rising energy costs have been at the core of the soaring inflation rate.<\/p>\n\n\n\n

Analysis by price comparison website Bonkers.ie has shown that price hikes could increase the annual household energy bill by as much as \u20ac1,300.<\/p>\n\n\n\n

Mr Lane, a former governor of the Central Bank of Ireland, said he expects pressure in the energy sector to ease this year.<\/p>\n\n\n\n

But Europe\u2019s position as a major importer of energy and external geopolitical factors add uncertainty to the mix.<\/p>\n\n\n\n

\u201cThe fact that energy prices have risen so much is a major concern,\u201d he said.<\/p>\n\n\n\n

\u201cThe European economy is a major importer of energy. Collectively Europe, by paying so much more for energy inputs, this is a major economic issue.<\/p>\n\n\n\n

\u201cNow, the fact that prices have risen so much does mean, compared to last year\u2019s rate of increase, there\u2019s probably less upside this year.<\/p>\n\n\n\n

\u201cBut there are factors we need to look at, geopolitical issues among them for sure.<\/p>\n\n\n\n

\u201cOn the other hand, what we do think is supply pressures should ease in the aggregate this year.<\/p>\n\n\n\n

\u201cIn the oil markets, we think supply pressures will ease, but as you indicated, the gas market is quite important for energy in Europe, and there are all sorts of different dynamics going on there.<\/p>\n\n\n\n

\u201cBut I would remind you, of course, that supply responses are happening there as well in terms of, for example, the shipping of liquefied natural gas around the world, it\u2019s being redirected to Europe.<\/p>\n\n\n\n

\u201cSo we will keep an eye on this. It\u2019s a very important issue, but it\u2019s much broader than the ECB issue. The fact that energy prices have gone up so much is a major economic policy issue in general.\u201d<\/p>\n\n\n\n

Mr Lane also said that he did not anticipate that the ECB would make changes to borrowing rates, which have hit historic lows in recent years.<\/p>\n\n\n\n

\u201cWhen we think the high inflation is not going to be durable, the case for altering our interest rate policy is not there,\u201d he said.<\/p>\n\n\n\n

\u201cBut of course, let me repeat, we will have new data coming in all year long and you can expect the ECB to pay a lot of attention to all of that data.\u201d<\/p>\n

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