Concerns about excessive inflation in the eurozone are exaggerated

Concerns about excessive inflation in the eurozone are "exaggerated at the moment". This was announced on Friday by the Central Bank Governor Gabriel Makhlouf in a speech at the annual Dublin Economics event, which takes place online this year. According to Makhlouf, who is also a member of the Governing Council of the European Central Bank (ECB), current price pressures reflect "transient factors that will disappear over time". However, he noted that problems in some supply chains may be prolonged. The ECB will therefore continue to monitor risks closely. Recent data have shown that inflation in the euro area accelerated to 3 percent in August (from 2.2 percent in July) to a 10-year high as the recovery in the global economy pushed energy prices even higher. The Governor of the Central Bank of Ireland also noted that there was considerable uncertainty about the persistence of price pressures. "We need to interpret these (inflationary) data and the outputs of our models carefully. Humility and vigilance are essential so that we can respond if conditions change," he said. In the meantime, he said, it would be important for the ECB to maintain an accommodative stance on monetary policy "for a while" to ensure the region's continued recovery from the COVID-19 pandemic. An increase in ECB interest rates in response to a temporary rise in prices would be detrimental to these efforts, he added. The ECB, which took its first small step last week to unleash emergency pandemic aid, has also raised its inflation forecasts, which it has recently seen at 2.2 percent this year, to fall to 1.7 percent next year and to by 2023 to 1.5 percent. Makhlouf noted that with sound monetary and fiscal policies in place, inflation should return to the ECB's target of 2 percent in the medium term, with a sufficiently strong recovery in demand.