Latest News

Europe at risk of higher inflation; ECB’S PEPP should end in March: ECB’s Knot

Economy1 hour ago (Oct 14, 2021 13:50)

© Reuters. FILE PHOTO: ECB board member Klaas Knot appears at a Dutch parliamentary hearing in The Hague, Netherlands September 23, 2019 REUTERS/Eva Plevier

FRANKFURT (Reuters) – Euro zone inflation could exceed expectations in the short and medium term, and this outlook for price growth warrants an end to the European Central Bank’s emergency bond purchases next March, Dutch central bank chief Klaas Knot said on Thursday.

Inflation has surged this year on a long list of one-off developments but a growing number of observers, including the International Monetary Fund, warned recently that price rises could be stickier than once thought and may become more permanent.

“The risks for headline inflation are again tilted to the upside,” Knot said in a speech. “Upside risks, in the short to medium term, are mainly linked to more persistent supply side bottlenecks and stronger domestic wage-price dynamics.”

Knot, a hawk on the ECB’s Governing Council, argued that even if these upside risks do not materialise, the bank’s baseline projection alone warrants an end to the 1.85 trillion Pandemic Emergency Purchase Programme.

“The ECB’s current baseline scenario is consistent with ending the PEPP in March 2022,” he said. “While we are currently thinking about options to ease the transition out of the PEPP, incoming data should clarify how the risks surrounding our current inflation baseline will play out.”

Knot, however, appeared relaxed about the longer-term inflation outlook, playing down some market fears that prices would spiral out of control.

He argued that the inflation outlook was now “back on track” and market-based inflation expectations were putting price growth broadly in line with the ECB’s own 2% target.

“I very much welcome these developments,” Knot said. “Coming from a prolonged period of setbacks and deflation risks, this is good news.”

The ECB has undershot its inflation target for most of the past decade, despite unprecedented stimulus, including copious asset buys, subsidised loans to banks and deeply negative interest rates.

The bank’s baseline projection now sees inflation rising towards 4% at the end of the year before falling back under target in 2022.

Europe at risk of higher inflation; ECB’S PEPP should end in March: ECB’s Knot

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Weekly Initial Unemployment Claims Decrease to 293,000

Previous article

CAD, AUD, NZD Rise in Risk-on Markets, JPY Selling in Force

Next article

You may also like


Leave a reply

Your email address will not be published.

More in Latest News