Economic Watch: ECB shrugs off inflation concerns as economic rebound gains traction
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E-mail Xinhua, October 29, 2021
FRANKFURT, Oct. 29 (Xinhua) -- Defying surging inflations in the eurozone, the European Central Bank (ECB) on Thursday kept key interest rates unchanged and the floodgate of stimulus money open.
Admitting the higher inflations have been going on for a period longer than the central bank originally expected, ECB President Christine Lagarde said at a press conference, "We expect it to rise further this year."
Meanwhile, Lagarde repeated her previous forecast that inflation will decline in 2022, citing the subsiding price hike pressures from different factors.
In an upbeat tone, the ECB chief also said economic recovery in the euro area would continue, bolstered by the accommodative monetary policy and favorable financing conditions.
PRICE HIKES LASTING LONGER
The mismatch between surging demand and lagging production, among other factors, has been driving prices higher ubiquitously across the world.
The eurozone felt the heat while the impact of skyrocketing energy prices has pushed product and services prices higher in the area.
The inflation in the eurozone that covers 19 European Union countries, went up steeply by 3.4 percent in September, its highest level in 13 years, according to preliminary data from Europe's statistics office Eurostat.
Germany, the largest economy in the bloc, saw a rise of 4.1 percent in inflation in September, a level last seen 30 years ago.
It is widely believed that the factors driving up prices, mostly related to the pandemic-caused disruptions in supply and demand, are transitory. However, there have been mounting concerns about the possibility of persistent price hikes leading to elevated wages and stagflation.
The ECB's assessment of the inflation risks on Thursday is in line with Lagarde's earlier assertion that there was no broad-based upward pressure on prices.
"We see the risks to the economic outlook as broadly balanced," Lagarde said.
INFLATION WORRIES UNWARRANTED
The surging prices have resulted in divergent responses from central bankers across the world. Some have already rushed to taper down their stimulus and raise interest to rein in the price increases.
Lagarde said the ECB expects the influence of the main factors behind the inflation to ebb in the course of 2022.
She elaborated that the rise of energy prices, imbalance of supply and demand, and the value-added tax cut in Germany in 2020 were three factors contributing to the upswing in inflation.
The Bundesbank, Germany's central bank which is known for its wariness about inflation, said in a report released Sunday that inflation in the country would rise further before gradually declining in the coming year.
ECONOMIC RECOVERY GAINS TRACTION
The accelerated vaccinations among European countries paved the way for governments to ease or drop restrictions and reopen their economies. As a result, the eurozone economy had bounced back from contractions for two consecutive quarters, according to Eurostat's data released earlier.
The eurozone economy grew by 2.2 percent in the second quarter of this year, beating economists' forecasts, according to revised data of Eurostat.
Buoyed by strong consumer spending and the recovery in domestic and global demand, the economic recovery in the 19-country bloc is gaining momentum.
By leaving the ultra-low interest rates and asset purchase paces unchanged, the ECB looks to maintain an accommodative monetary policy to create favorable financing conditions, the ECB chief said at the press conference.
"The euro area economy continues to recover strongly, although momentum has moderated to some extent," Lagarde noted. Enditem
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