Inflation in the euro area is driven by many temporary factors and major trends remain weak, so the European Central Bank should maintain its ultra-light policy, ECB chief economist Philip Lane said Thursday.
“The volatility of inflation between 2020-2021 can be largely attributed to the nature of the pandemic shock,” Lane said on his blog. “Medium-term inflation prospects remain moderate on the back of weak demand and significant sluggishness in labor and commodity markets.”
Lane spoke out in favor of addressing this volatility, which could even temporarily push inflation above the ECB’s target, and urged governments to continue spending to support growth as the bloc is likely to plunge into recession again in the first quarter and will also struggle in the second quarter.
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