'Green energy may create high inflation' warning from the ECB official

While energy prices in the Euro Zone put pressure on inflation, an inflation warning came from the European Central Bank. European Central Bank (ECB) Board Member Isabel Schnabel said that policies to fight against climate change are likely to keep energy prices high for a long time, and may cause the European Central Bank's incentives to end earlier than planned. Speaking at the annual meeting of the American Financial Associations, Schnabel said that the planned transition from fossil fuels to a more environmentally friendly, low-carbon economy poses serious upside risks to base inflation forecasts in the medium term. Isabel Schnabel also said that inflation in the green energy process could cause central banks to reconsider their position.

Inflation in the euro area broke a record

Contrary to the European Central Bank's view that the rise was temporary, inflation continued to rise in December, breaking a record. Consumer prices rose 5% year-on-year in December. Inflation rose by 4.9 percent in the previous month, breaking a record. The median estimate of economists surveyed by Bloomberg was 4.8 percent. CPI, excluding food and energy, increased by 2.6 percent annually, as in November. At the same time, ECB President Christine Lagarde stated last month that inflation will stay higher for a while, and then the 2 percent target will be reached. Lagarde stated that the most correct response to the price increase would not be an interest rate hike. Despite this, markets are pricing in a rate hike by the end of the year. The problem of rising gas prices in the region continues. This rise threatens production in energy-dependent sectors.